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LIFE INSURANCE AUSTRALIA

What is life insurance?

Life insurance is a policy that will pay a specified sum of money to the estate of the insured upon the death of the insured. In exchange, the insured person agrees to make regular payments of premiums (on a weekly or monthly basis) to the life insurance company. The life insurance policy is subject to strict limitations, exclusions, terms and conditions. It is therefore extremely important for you to know the life insurance policies limitation, exclusions, terms and conditions before you sign the contract. You should seek advice from a financial advisor before signing any policy document.

Do you need this type of insurance?

Have you ever thought how your family would cope financially if you were to pass away unexpectedly?

You should regularly review your family's financial situation, in conjunction with your financial advisor, to ensure that you are appropriately insured. The greater your financial obligations and the more dependants you have, the more life insurance you may need to protect your assets and your family's financial security. Obligations which may need to be considered are your mortgage, paying for your childrens future education, settlement of personal debts, funeral expenses and your family's future living expenses.

How much life insurance cover do I need?

The purpose of life insurance is to provide your dependents with a sum of money sufficient to pay out your debts and/or to provide an income sufficient to support your family for a period of time - usually until your children are 18 years old. As everyone's situation is different, the level of life insurance cover required will vary. Most financial advisors will recommend that you have life insurance cover equivalent to a minimum of 10 times your average annual income.

How do you choose the right policy?

It is best to talk to a financial advisor who has access to a wide range of competitive life insurance products. They have the experience and expertise to guide you in choosing the right product for your particular situation and budget. Premiums vary depending on age and health history. Your advisor can provide a guide, but your application will need to be formally assessed by the insurer life before you final premium is known.

You should also do some research on the proposed company whose policy you will be taking up. You will need to be comfortable in investing these payments into a reputable, stable, financially sound company. Most people rely on one of the major rating agencies such as Standard & Poors who specialize in rating the ability of a company to meet it financial obligations. You should aim to be covered by an insurer with a 'AAA' rating.

Further information

Life insurance is an important and integral part of a comprehensive and sound financial plan. When you sign up for life insurance it is also best to review your will ensuring your will is current i.e. no older than 3 years old. The making of a Will ensures that your assets pass to the people of your choice. If you do not have a will, your estate will be subject to state intestacy laws. This legislation may not be consistent with your wishes. Please refer to the articles on Wills & Estate Planning.


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