Your Quick Guide to Life Insurance Types in Australia

Life insurance is often considered one thing, but in reality, it encompasses much more. For many insurance companies, life insurance comprises a range of protections, including death cover, TPD, trauma, and income protection.

This article outlines the purpose of life insurance and the various kinds of policies available. Keep reading to learn about the different policies and how they can be used to provide you with financial security.

What are the Main Life Insurance Types in Australia?

Life Insurance

Life insurance is a way to provide financial security to your family in the event of your death. You can purchase a policy to pay out a set amount of money to your designated beneficiaries upon death. This money can be used to provide a lump sum for the family to fund living expenses, pay for future expenses for your family, for example, children’s education, or to cover any other costs associated with your death.

To obtain insurance, you must fill out an application form with information about your medical background, lifestyle, job, and hobbies. Depending on your medical history and the coverage you need, you may also have to undergo additional medical tests.

Life insurance premiums can be funded via superannuation or personally.

Total and Permanent Disability (TPD) Insurance

Total and Permanent Disability aka TPD insurance provides a one-time financial payment if a severe health issue or accident causes you to be unable to work. If you are looking for financial protection in the event of a disability, you may want to consider taking out a TPD insurance policy.

This type of policy can be added to a life insurance policy or purchased on its own. It may provide a lump sum payment if you cannot work due to a medical condition, enabling you to pay off debts, replace lost income, and cover modifications to your home that you may need to cope with the disability.

As with life insurance, TPD premiums can be funded via superannuation or personally.

Trauma Insurance

Trauma cover insures you should you experience a serious medical condition, for example, heart attack, stroke or cancer. Your insurer should indicate definitions of each condition in the policy since insurers categorise these disorders differently.

People get trauma cover to alleviate financial stress in the case of a serious health emergency. Experiencing a severe illness or injury entails not only hospitalisation; it involves spending lots of money on other medical costs which may not be fully covered by health insurance, for example, rehabilitation therapy, medication, ongoing doctor appointments, plus more.

With a trauma insurance policy, your lump sum payment means that you can rest easy, knowing that financial expenses will not be as heavy – and you would not want to experience financial hardship or rely on financial support from your family.

Trauma premiums must be funded personally.

Income Protection Insurance

This type of insurance provides you with a regular income (up to 70% of your salary) if you cannot work due to an illness or injury. The payment received is usually paid out in monthly instalments and can be used to cover your basic living expenses.

Income protection insurance can help to partially replace your salary in the event of an illness or injury. Salaried workers will receive their payouts based on the amount of income they had pre-tax, and those who are self-employed will receive their payouts based on their net income.

You are also able to choose the waiting period and benefit period of your policy:

• Waiting periods: can span from 30 days to 2 years.
• Benefit Periods: can be a fixed-term of two or five years, or up to a specific age (maximum age is 65).

Invest in Comprehensive Life Insurance with Expert Advice from NFPG

If you already have life insurance or are considering getting it, it’s a good idea to compare different providers to ensure you have the right coverage for your needs at the best price. Make sure to read the details of each policy carefully to see what is covered and any exclusions that might apply.

Choosing life insurance in Australia is an important decision that should not be taken lightly. Before making a decision, it is essential to research the different types of life insurance available and find out which mix of covers best suit your individual needs.

Additionally, it is crucial to be aware of potential tax implications and their effect on your overall financial situation. By taking these steps, you can be sure to select life insurance policies that meet your needs and budget.

If you need insurance advice in Newcastle, turn to Newcastle Financial Planning Group. We are here to offer trusted financial advice to protect you and your family. Call us or book online to secure your first appointment with us today and learn how we can work together to achieve your financial freedom!