Life insurance cover pays a lump sum on death if you die while you’re a policyholder.
You can combine Life cover with TPD and Trauma cover to help reduce costs. However, if you make a TPD or Trauma claim the Life cover will be reduced by that amount. Some policies have an inbuilt buy-back facility to reinstate the lost Life cover after a certain period of time, while others have this feature as an optional extra.
Using super to pay for your insurance
Some types of insurance allow you to pay the premiums automatically from your superannuation fund. This can be a tax-effective option because it enables you to pay your premiums with pre-tax money. Using money that is normally inaccessible until you retire also means you don’t have to dip into your daily living budget.
Cost of premiums
Apart from sex, occupation, health and age some other factors that affect premium costs are:
- Stepped or level premiums. Stepped premiums increase with the life insured’s age. Level premiums don’t increase with your age up to age 65, after which time they revert to a stepped-style premium. Stepped premiums are generally cheaper at the beginning but over time become more expensive.
- ‘Bundled’ policy. Insurance companies usually offer a discount if you combine Life with TPD and/or Trauma insurance cover.
It’s important to accurately assess how much insurance you need. This is an area where Wealthwise can help you. We’ll help identify your greatest areas of risk and work out how much cover is appropriate for your needs.