Life insurance plays an important role in protecting a family in the event a person passes away. Having a life insurance policy means that if the insured dies, the beneficiary listed on the policy will receive a specific amount of money, as stipulated on the insurance contract.
What do I need Life Insurance for?
Passing away is not something we often think about, and it can be an uncomfortable subject matter for some, but unfortunately people do die and the financial consequences of a persons death can be very high.
When a person dies there are a number of issues that can arise, such as;
- How to replace the income generated by that person
- Who will look after the children of the deceased
- How will the mortgage on the family home be managed
- Where will funeral expenses be funded from
These financial problems can compound an already emotional time for a family that has just lost a much loved member of the family unit.
Because life insurance provides a financial lump sum in the event of someone dying, the financial consequences of someone’s passing can be reduced and effectively managed – removing the financial burden of the death.
How does it work?
In exchange for a premium, a person can create an insurance contract (policy) with a life insurer. This contract effectively says that if the person listed on the policy passes away, and the contract is still in force, then the insurer will pay the beneficiary the sum insured (amount). There are many life insurance policies in the marketplace and they are all different in many ways, so professional advice can be useful when picking a policy – after all, who wants to find out a policy is no good after someone has passed away.
How much does it cost?
Many life insurance providers will ask the Life Insured (person to be covered) to complete a health questionnaire. From here the insurer will calculate a premium (a monthly or annual amount in exchange for the policy). Fortunately, it is possible to get an idea of the cost before undergoing a health questionnaire. A financial planner who can provide advice on life insurance can generally give you an idea of premiums through an advice document and quote.
What happens if I pass away?
Generally, you are able to nominate a beneficiary – someone who receives the funds in the event of the life insured passing away. This beneficiary may be your partner, your children or your extended family. You may even be able to select your friends or a charity, depending on the policy you hold.
Once a death certificate is received by the insurer, funds are deposited into the beneficiaries account. These funds can usually be used for any purpose, i.e they do not have to be used on a funeral or a mortgage.
I’ve heard I can have Life Insurance in my Super?
Some superannuation funds do allow you to hold life insurance in your super fund. However, the beneficiary of these funds must usually be a partner, children or some who is deemed to be dependant. This definition is quite specific and you should speak to an adviser, so that the right person receives the funds. There are many instances of life insurance policies in super being given to alternate beneficiaries because proper care has not been taken.
One of the benefits of holding your life insurance in your super is that you can use your super balance to pay for your premiums. This may be beneficial if you do not have spare cashflow for insurance, but you need protection.
Want to know More?
These are just a few of the common questions we receive about Life insurance. If you are considering life insurance and you would like some professional advice, feel free to review our Insurance Services. Otherwise please call us to discuss your needs. We provide an initial consultation for free and are always happy to help.
Need tailored Life Insurance Advice? Want a quote for Life Insurance? Contact us on (07) 5437 9243 or at email@example.com for an obligation free discussion on suitable Life Insurance options for you.