Family & Couples Life Insurance

WHY YOU MAY NEED JOINT LIFE INSURANCE COVER FOR COUPLES

Every couple and family are unique, and there are vast differences from family to family. What is important to you and your value system will not be the same as another. With this difference come unique financial responsibilities and circumstances.

In some households, the financial obligations are shared equally with both or more parties employed. In other homes, only one partner might be working while in another, the person may be a stay-at-home parent or a childless couple where one person is studying or cannot contribute to finances due to health reasons. You may also be an older couple in your mature years or empty nesters.

No matter who you are or your familial contributions, you need to pay for things like mortgages, childcare, schooling, car payments, personal loans, and medical bills. Clearly, being in a marriage or partnership involves serious life choices and commitments.

In the unfortunate event that something catastrophic had to happen to either of you, you would naturally want the other partner to maintain the quality of life you had together and be able to honour the financial obligation a life together entails.

We have explained on some of the reasons couples should have life insurance to implement measures that relieve the pressure following a tragedy such as a terminal illness or death. Here is some more information to help place the importance of life insurance in context:

• Paying off a mortgage – In most households, whether the couple is married or in a de facto partnership, the monthly mortgage payment is determined by the joint or overall income. Imagine the monetary risk if one of the partners dies or cannot contribute due to illness. 

One person will be left to pay a premium well beyond their means. A joint life insurance policy will alleviate this worry, providing the financial solution and support when you need it the most. 

• Managing ongoing living expenses – Whether in the case of a dual-income household or one with a sole breadwinner, the ongoing living expenses will be an area of concern if either partner had to pass away. 

However, in the case of a one-income home, the costs may fall on the shoulders of the non-earning spouse or partner, creating a heavy burden to carry, especially in the case of a household with children or dependants. For this reason, a joint life insurance policy will provide a very welcome financial relief for the remaining partner. 

Adults should nominate children over 18 to provide a solution in an instance of double jeopardy where both partners pass away to protect their underage children. Appointing an heir early on to manage the finances when you’re no longer there will ensure the children are taken care of at least until they reach their majority age. 

• Settlement of debt – There are not many households currently without financial obligations. Most couples or families will require financial aid or a loan at some point in their lives, and this will necessitate regular repayments, usually with interest. This situation is typically more manageable with two people contributing to the shared debt, such as personal loans, joint accounts, vehicle loans, or credit card bills. 

However, if one partner were to die, the survivor could be legally responsible for the joint debt. If both partners were to die (double jeopardy), any children or dependants left behind could risk losing their present and future security. 

Taking out a joint life insurance policy will be a worthwhile investment. Most policies provide a payout whereby any debt will be covered in full, leaving those behind without the overwhelming burden of making an inconceivable plan in an already stressful situation. 

• Handling final expenses – Death can be an overwhelming time for those left behind. The heart-breaking and often sad circumstances leading to the passing of a partner or spouse can be all-consuming. During this time, your partner will need all the support they can get. 

Funeral or burial expenses alone can be enough to cause worry. An excellent solution is for you to use joint life insurance. Joint life insurance means that you can meet the funeral costs with the lump sum you receive after one of the policyholders passes away. Although the beneficiary decides what they do with the life insurance payout, covering the fees of the funeral could be one such decision. 

COUPLES LIFE INSURANCE FOR UNMARRIED COUPLES

Suppose you are an unmarried couple in a de facto relationship (those who are not lawfully married but are in a committed relationship and live together). In that case, the good news is that joint or couple insurance can still work well for you and your relationship.

A de facto relationship usually means that while you are not married to your partner, you are living together as a genuine domestic couple, wherein one of the following should generally be true:

• You have lived together as a couple for at least two years.
• There is a child because of your relationship.
• You have registered your relationship under state or territory law.

Because you live together, you may want to choose your life insurance type and cover amount based on your combined income, health, and whether you have children together or separately. Then, depending on your requirements, an insurance company can tailor a joint life insurance policy to match your specific needs. 

COUPLES LIFE INSURANCE FOR GAY OR LESBIAN COUPLES

It is essential to provide financial security for your significant other should you die unexpectedly. This provision will be valuable for any couple, no matter their sexual orientation. In this modern world, laws and policies are changing to include same-sex couples in the same benefits as heterosexual or opposite-sex couples.

Dating back to 2008, the Australian parliament amended the Superannuation Industry Act of 1993 to provide equal treatment for same-sex de facto couples. This Act states that the word ‘spouse’ now includes ‘another person (whether of the same sex or different sex) who, although not legally married to the person, lives with them in an authentic domestic relationship as a couple.’

In simple terms, this amendment allows same-sex couples to receive the same life insurance opportunities as unmarried opposite-sex de facto couples, including purchasing a couple’s life insurance policy. 

COUPLES LIFE INSURANCE FOR NEWLYWEDS OR YOUNG COUPLES

As a newly married couple, you are probably excited to build your life together. However, if you have just married, then the chances are you already have a substantial amount of debt from the wedding itself.

It is common for many couples to take on significant expenses when getting married. For example, the average Australian wedding costs $36,000, with the majority (60%) of couples borrowing the finances to pay for this celebration. So, before you even cross the threshold into married life, couples will often have debts to consider.

In the early stages of a marriage, young couples will typically investigate taking out a mortgage for their dream home, decorating their new home, and may even investigate planning a family. But unfortunately, houses or units in Australia are not a cheap commodity, possibly setting a couple back approximately $800,000 for a house or $565,000 for a unit.

The reality is that most young couples do not have significant savings yet and so a mortgage will be their only option. If one of you were to die suddenly, life insurance would help your young spouse pay for shared expenses, outstanding debts, funeral fees, and the general cost of living.

Not many young couples want to think about death or illness, but it is always wise to secure both of your futures. There is a definite benefit to taking out life insurance cover when you are young. A couples’ life insurance policy will provide you with:

• The peace of mind that you are securing your partner’s future with a lump sum payment, ensuring they have many opportunities to live a quality life when you’re no longer there. Your beloved significant other could use the payout to help with studies or related educational expenses, relocating, travelling, or even purchasing their first home.
•  As painful as it is to consider death, it is compassionate to provide your partner with support in this event.
• Also, you may be eligible for better coverage options because of your youth. In addition, insurance companies may be more inclined to grant applications for certain optional extras while you are younger. As you age, policy limitations will often increase along with premiums, making purchasing the level of cover you desire more challenging.
• Moreover, your youth can provide you with lower premiums as the policyholder’s age usually determines the cost of a specific insurance product.
• Your age may qualify you for a higher cover amount if needed. Many policies that are available offer different cover amounts depending on your age. 

LIFE INSURANCE FOR YOUNG COUPLES WITH CHILDREN

Every family is wonderfully unique, with delightful cultural differences. Still, everyone can agree that the one thing that every family has in common and unites them as parents is the deep and all-consuming desire to do the best for their children.

Life does not always go as we hope and dream and seldom follows our expected path. This unanticipated trajectory is why it is so important that couples with children take out life insurance policies. Being prepared is vital to the future wellbeing of you as a couple and for your children.

Statistical data reveals that many young families in Australia do not have sufficient life coverage. This scenario, unfortunately, means their partners and children may not have enough to meet their financial needs if the primary earner passes away. Or, if the worst happens and both parents pass away, you will leave your children with insufficient resources to make it through to adulthood without unnecessary suffering.

We cannot possibly pre-empt all the risks in our futures, but neither do we have to worry about them unduly if we plan carefully for the unexpected. Therefore, most young couples with children feel that it is worth preparing for the financial challenges that their family may face should they pass away or be diagnosed with a terminal illness.

Most life insurance products with our insurers through WealthSmart offer a lump sum payment in proportion to your needs. These products will help give your family financial security if either you are your partner passes away or becomes terminally ill.

The great benefit of this level of preparation is that it takes the worry out of an already traumatic time for your loved ones. In addition, it provides them with many life opportunities such as travel, education, and comfortable quality of life when you’re not there.

As a young couple with children, a joint life insurance policy with our insurers will include:

• Security and stability for your children’s future: The advantages of a life insurance policy are that you can pay for your children’s education and school fees and extracurricular and everyday living costs such as food and clothing.
• The peace of mind that your family will be able to keep and look after the family home. With life insurance benefits, your family can pay the mortgage after you have passed away and might be able to clear their debt altogether.
• Optional benefits such as children’s insurance can cover your children under 18 for terminal illness or severe specific injury or illness. 

LIFE INSURANCE FOR MATURE COUPLES

Most couples at the empty nest stage of life can feel a sense of freedom brightening the horizon at the prospect of their children getting older and becoming financially independent. But unfortunately, this is a time in many mature couples’ lives where they have a million plans, from eventually travelling abroad, having the time to pursue new hobbies, and spoiling future grandchildren.

The best thing mature couples can do is have their affairs in order. This way, they can pursue their plans without worry and concern for the unforeseen. It is part of life that financial setbacks can arise without warning. Having goals to prepare for life’s unexpected challenges, either for you or your extended family, is never a waste of time or money.

There is still so much life still to live at this stage, and the wellbeing of your spouse and children should be paramount. If you do not have life insurance cover in place, it is best to rectify this situation as quickly as possible. So, take the time now to set up the best future possible for your loved ones.

Our insurers at WealthSmart will assist you with making the best decision for your life coverage as a mature couple. Our advisors can help you identify the right life insurance for you and your family from various products.

We will not leave you on your own but will facilitate every step of the application process. Your needs may be slightly different to those of a young couple and family. However, life insurance can help preserve the lifestyle you have worked hard to create and offer you the following:

• Security and peace of mind for your older children: Your children are beginning to carve out their paths in life. They may be moving out of the family home or studying for their future careers. Should either you or your partner develop a terminal disease or pass away at this critical stage, you could use your life insurance benefit to help the other stay on track with their economic goals and wellbeing.
• A way to protect the hard work of a lifetime: You might have already started paying off your mortgage or any other assets for your family. It will be good to know that you can protect all your hard work and planning should life take a turn for the worse. 

WHY YOU MAY NEED LIFE INSURANCE FOR FAMILY

Thousands of Australian families find it valuable to take out life insurance for their families. However, the term ‘family insurance’ is not entirely accurate as there is simply no product with that name. Still, companies provide clients with term life insurance to nominate their partners or dependants as beneficiaries.

The purpose is to give them a lump sum payment should they pass away suddenly or become terminally ill. Receiving a lump sum payment will help them pay living expenses and maintain the quality of life they were enjoying with you.

Insurers frequently recommend family life insurance whether you are the primary source of family income, secondary, or a non-earner in a relationship. Partners can insure themselves for different amounts, even on a joint insurance policy. If a stay-at-home parent or partner passes away, there are always massive financial implications to their passing.

Think of it in terms of a parent who stays at home. They may not be earning in a conventional sense, but what they contribute to the house in terms of childcare, housekeeping, cooking, or driving disappears in the event of their passing. In addition, their contribution will result in expenses for the remaining parent. So, life insurance cover is vitally important to ensure funds to compensate for these ongoing needs.

Life insurance is exceptionally valuable in helping to pay for expenses when your family must survive on one less income. There may be several immediate expenses, including hospitalisation or the funeral bill. Additionally, you will likely face long-term costs, all of which a life insurance policy can help you overcome with ease, including:

• Childcare/education
• Food and clothing
• Medical requirements
• Mortgages and loans
• Household bills 

CO-PARENTING AND LIFE INSURANCE COVER FOR FAMILY

We all want a happy ending when we choose a life partner or spouse, and in an ideal world, this will be the outcome of your choices. However, this is not how things often work out in the real world.

Marriages often end with divorce, and de facto partnerships may dissolve, often with children or dependants in the wake of a breakup. For this reason, life insurance policies that cover dependants and the co-parent are essential.

On a far more positive note, those who are not part of a conventional partnership but have or want children will also benefit from considering life insurance.

In the above cases, either single or joint policies are beneficial. Here are some scenarios and points to think about when it comes to co-parenting and family life insurance:

• Co-parents need family life insurance because while you might not be together romantically, raising children together leaves you financially connected in many ways. 

• In many cases in this modern world, co-parenting is a way of creating a family for many gay, lesbian, or gender diverse people, often providing them with a means to raise their own biological children. In this scenario, co-parents are jointly responsible for the child’s needs. Again, family life insurance can be the answer to ongoing financial support if one parent were to pass away. 

• It would help if you had protection, whether you are co-parents by choice, happily sharing parenting responsibilities or co-parents by circumstance post-separation. Having a life insurance policy separately or jointly protects your child from the adverse economic effects of losing one or both parents. 

• It is always best to have open and frank conversations about the realities of life like death and illness as part of a co-parenting partnership. This communication shows maturity and responsible parenting, demonstrating that the child’s needs are paramount. Ultimately, communications relating to this critical element in life must revolve around the child’s long-term wellbeing if you are to embody the responsible parenting of your child or children. 

• If you’re entitled to and receive child support or maintenance following a divorce, remember that you will lose this income if your ex-spouse dies. Essentially, losing a parent increases the household’s financial obligations for the surviving parent – a situation that typically occurs when you can least cope. Therefore, a life insurance policy’s primary design is to help protect the nominated beneficiary from the financial impact of losing a parent. 

• You may have plans for the child you co-parent already in motion that requires financial security. For example, if one parent had to die or no longer be able to contribute due to illness, then buying a life insurance policy could be the right strategy to provide for those plans.
• In any co-parenting scenario, if you or your child still depend on a former spouse, partner, or the other co-parent financially, their demise can severely impact your financial security, quality of life and ability to provide for the children. 

• If you receive maintenance or child support after a divorce, remember that if your ex-spouse dies, their income will disappear. Again, family life insurance can fill the financial void by providing an excellent solution to your problems. 

Taking out a family life insurance policy is a proactive approach to co-parenting. Even if a co-parent already has their own life insurance policy with beneficiaries, it will be in the parties’ best interests to explore which additions or extra coverage might be necessary. This research is advisable when providing for the child or the co-parent left with the responsibility in a worst-case scenario.

At WealthSmart, we help you navigate even the most sensitive situations. We are happy to walk you through the process of finding out the most appropriate insurance solutions for everyone so that you can cater to all life’s curveballs. 

FAQs

WHAT IS THE DIFFERENCE BETWEEN SINGLE AND JOINT LIFE INSURANCE?

You may be wondering about the difference between a single and a joint life insurance policy. We break it down for you in a way that is easy to understand:

• Single life insurance policy – as the name suggests, a single life insurance policy is only financial coverage for the individual. Therefore, one person is the sole owner of the policy. In the case of single life insurance policies, couples can name each other as beneficiaries on their respective policies. This decision means that the individual’s partner will receive the benefits and financial aid should anything happen to the policyholder, leading to their death. In the case of terminal illness, the insurance company pays benefits to the policyholder.
• Joint life insurance policy – joint life insurance is also often referred to as ‘multi-life’ insurance by some companies. It is just as the name suggests, where two people buy insurance under one policy instead of having two separate policies, as in the case of single life insurance. Holders of joint insurance policies are often two people with shared financial interests or responsibilities. This situation typically includes married people or spouses, life partners, or de facto partners (those who are not lawfully married but are in a committed relationship and live together). Although the policy is a combined one, it still can provide the couple with varying insured amounts for each person.
• As with a single life insurance policy, the insurer pays the benefit amount to the surviving insured person. The terms and conditions for this benefit will vary between insurance companies, some requiring you to make your partner the sole beneficiary when purchasing the policy. In the case of the death of one of the partners, the policy will then be in the hands of the other partner, making them the sole owner. The policy then operates as a single insurance product. If one partner is diagnosed with a terminal illness, the insurer pays the benefit sum to both policy owners. 

WHAT BENEFITS CAN YOU EXPECT FROM A JOINT LIFE INSURANCE POLICY?

• Most insurance companies offer a 5-10% discount on your monthly premium.
• A joint insurance policy will be more affordable than two separate life insurance policies.
• A joint insurance policy will pay benefits to both partners if either is diagnosed with a terminal illness.
• It is simpler and more convenient to only work with one insurer and policy.
• The claim process is generally simple and easy. You submit the claim with all the paperwork, and once the insurer approves it, they make the payout to the remaining partner if they’re the listed beneficiary. 

WHEN A COUPLE GETS DIVORCED OR SEPARATES, WHAT HAPPENS TO THE LIFE INSURANCE POLICY?

A joint life insurance policy can become problematic and complicated after a divorce or if your relationship breaks down. Unfortunately, some policies are locked into terms and conditions, and divorce or separation cannot change them.

Your options would be to keep the policy in place, cancel it or convert it into a single individual policy, requiring one of the partners to sign over the policy to the other. This choice can either be made easily in an amicable divorce or as part of court proceedings in the case of unmarried individuals.

The downside is that you will only be able to split the policy if both parties agree. In the case of refusal, the policy will remain in place if the owner maintains regular premium payments. This scenario essentially means that if one of the insured partners dies, the insurance company will still pay the benefits to the surviving insured former spouse or partner.

Another aspect to consider is that if both partners agree to split the policy, any previous joint policy discounts will almost certainly no longer apply. Therefore, premiums will increase on the two new individual policies.

Another thing to remember when it comes to divorce or separation is that a life insurance policy will not reimburse you for premiums should you choose to cancel it, resulting in a financial loss.

On a positive note, insurers are looking into making better provisions for joint life insurance policies, and, hopefully, these products will contain greater flexibility in due course.

HOW MUCH LIFE INSURANCE DO COUPLES AND FAMILIES NEED?

Just buying life insurance is not enough. You need to go into it being well informed and make decisions based on your specific needs and requirements. Life insurance is not always as simple as just paying your mortgage or covering your current expenses. It requires more evaluation than that. Our brokers at WealthSmart can undoubtedly facilitate your decision-making and ensure that you walk away with the best possible life coverage. 

The key to the most suitable level of insurance that you, as a couple or family, will need is to get an adequate sum assured to take care of your income and living expenses if something happens to you or your partner. This recommendation stems from the fact that running a household and daily living is expensive, especially when one partner is no longer around.

Essentially, insurance experts design life insurance to pay for the big stuff, so you don’t need to sweat the small stuff. This product ensures your loved ones can financially cope if something happens to you. But how much is enough?

Minimum Amount: The minimum amount required will be just enough to cover the debt on a primary residence. So basically, the benefits should be enough to pay off your mortgage. This financial obligation should be a significant priority over everything else, at the very least ensuring that your family will have a roof over their heads.

Maximum Amount: There is also the option of getting cover that will provide an income stream so those you leave behind can enjoy a similar quality of life both in the present and in the future. 

HOW DO I WORK OUT HOW MUCH I WILL NEED TO BE INSURED TO PROVIDE FOR MY PARTNER AND FAMILY?

Most Australian insurance companies offering life insurance will advise you to have one or more with a total death benefit equal to approximately ten times your annual salary. This amount should be before taxes and other salary deductions, in other words, your yearly gross income. Consequently, this benefit is the amount your beneficiaries will receive when the policy pays out, providing them with the finances to support themselves after they die.

According to most Australian life insurance calculators, around $1,000,000 in life insurance cover is the average. This figure is an approximate idea of what you could get if you have:

• An annual income between $81,000 and $100,000
• Two children between three and 13 years of age
• A mortgage between $250,000 and $500,000 

However, because this calculation only considers your annual salary, you will still need to evaluate other aspects. Here are some tips to help you establish how much coverage you will need and where to start:

• Assess your present financial situation – Gathering information about your current financial situation, for example, your monthly expenses, debts, assets, liabilities, and investment priorities, will give you a good starting point.
• Expense replacement – Consider how much your partner earns. Ask yourself if it is enough to cover outgoing expenses if you’re not around? If you are a parent, do you want your children to go to private or public school, and what additional financing will they need to pay for present and future opportunities? Will it be enough to provide for financially dependent parents for their entire lives? Then think about a sum insured that will do more than just cover your debts.
• Human life value – Considers the value of future income, expenses, liabilities, and investments. Is your goal to sustain your family’s current lifestyle in the future? The answer to this will help you decide the amount of coverage you should take.
• Income replacement – It is in your best interest that your life insurance replaces the lost earnings of the breadwinner. A quick and simple way to do the math is to use this equation and determine replacement value: insurance cover = current annual income x years left to retirement. 

WHAT DIFFERENT LIFE INSURANCE TYPES ARE AVAILABLE FOR COUPLES AND FAMILIES, AND WHICH ONES SHOULD I GET?

Choosing life insurance policies and optional extras suitable to your family’s needs can be daunting. However, these are a few options Australians can choose from, which can be discussed in more depth with our insurance brokers at WealthSmart:

• Term life insurance – This policy type can pay out a lump sum to your beneficiaries if you pass away or are diagnosed with a terminal illness. Nominated beneficiaries would be your spouse or partner and children. This benefit applies to both single and joint/couples insurance policies.
• Total and permanent disablement insurance – This policy can pay a lump sum to you, the policy owner, if you become disabled. Although this does not necessarily fall under family life insurance cover, it is certainly beneficial in providing for your family’s financial needs should you be unable to provide a living to support your partner or dependants because of a permanent disability.
• Trauma insurance – This policy will pay a lump sum to the policy owner if they suffer from a specific life-threatening condition like cancer or heart disease. The benefit will also payout if the policyholder is in an accident. Again, this is an excellent policy to have in place to provide for the needs of your loved ones.

Since not all policies share the same provisions and benefits, you may find that some life insurance policies also include other advantages like funeral cover, child cover, financial planning services, and grief counselling. However, it will be best to go over the details with your insurance broker, as some advantages attract extra costs. 

CAN I TAKE OUT LIFE INSURANCE FOR MY CHILD?

Yes, you can. Children under the age of 18 cannot be holders of a standalone life insurance policy, but there is the option to add them to your policy. This addition will apply to both single life insurance and joint insurance policies. Depending on the policy, you may be required to pay extra on your premium if you add child cover to the policy.

If you choose to take out life cover on your children, it will be best to do so as early in their lives as possible. The cover is valuable in paying for medical expenses should they ever become seriously injured or ill, which can happen at any stage of their childhood. In addition, children’s life insurance can shield you financially in many cases against their death or terminal illness. It is also possible that some policies can address:

• Medical events, including loss of sight, hearing, speech, or paraplegia.
• Carer benefits, for example, a monetary sum if you are forced to stop working due to seeing to the full-time care of your ill child.

However, depending on your policy and the insurance company, these benefits may fall under specific terms and conditions. Always check with your insurer to see what is included or excluded under the policy terms. 

WHICH FACTORS DETERMINE THE COST OF LIFE INSURANCE FOR FAMILIES AND COUPLES?

Life insurance for couples and families is the best way to protect your loved ones financially, to ensure that they have security for their future when you are no longer around. However, life insurance products for the family can be costly and are a lifetime commitment. On the other hand, life insurance is also the most comprehensive investment you can make, depending on your coverage. Over the years, even a slightly lower premium can yield significant savings.

If the main reason you do not have a life insurance policy is that you think it’s too expensive, you are not alone. But unfortunately, most people who do not have a life insurance policy believe this to be true. Now, they are not entirely wrong. Life insurance can be expensive, but people often overestimate the cost of a policy because they do not understand how life insurance companies come up with their rates.

The following factors are some of the most significant that insurers consider when determining the pricing of their policies. Of course, some of these factors are beyond your control, but there are other things you can do to ensure a better rate on your premium. For example, a simple lifestyle change, especially health-related ones, can significantly impact your premiums. Other control methods include:

• Are you insuring one or both partners? Several insured parties will determine a potentially lower premium rate. For example, if both partners are insured, as in the case of a joint life insurance policy, it may be more affordable than two separate single policies. Also, the amount insured on each partner will determine the premium rate.
• Do you need children’s life insurance on your policy? If you choose to take life insurance cover on your children, this will affect your premium price. For example, you can include children under 18 on your policy. However, this addition will incur extra charges.
• How old are you?  Your age is the number one factor behind life insurance premiums. This is because insurance companies look at your current age and life expectancy. Statistically speaking, the younger you are, the less likely you will die soon. So, the younger you are, the lower your premium will be, and the older or later in life you take out a policy means that you will pay more.
• What is your health status? – Your health status will influence your life insurance premium. If you have certain health conditions, you are more of a risk as you may need to have a life insurance payout sooner. A health exam will determine the necessary information about your health. In this exam, your doctor will take your medical history, record your height and weight, blood pressure, and cholesterol, and test your sugar levels. Insurers will also document certain risky habits like smoking and drinking.
• In what lifestyle habits/hobbies do you engage? Engaging in high-risk activities such as scuba diving, skydiving, and piloting a plane are considered risky to an insurer. Therefore, high-risk activities will affect your premiums as they increase the chances of early death. In addition, your chances of early demise are likely higher than those who do not participate in dangerous sports. 
• What is your occupation?  Insurance companies will charge more if you have a relatively dangerous profession. This factor can include professions like mining, fishing, or transportation. If your job includes hazardous duties, you could pay higher rates.
• What level of life insurance cover do you want? The level of cover or types of life insurance policies you choose will impact your premium. The most common life insurance policies for couples and families are term life insurance, total and permanent disability insurance, serious illness/trauma insurance, and children’s insurance.
• For what sum or benefit amount are you insured? The total sum or benefit payout of your life insurance policy will be a critical determining factor for your premium—the more insurance you or your partner purchase, the higher your payment rate.
• Does your family or couple’s life insurance policy include any additional cover or special conditions? With any life insurance policy, there are certain features or covered aspects under that policy. However, any other features, cover, or special conditions will often come at an extra charge, increasing your premium.
• Which premium structure do you prefer? Your premium is affected by this structure, so choose wisely. There are two structure options, stepped or level premiums, and each has a different implication on how much you will pay.
• What is your gender? After age, gender is the biggest determining factor of premium costs. Insurance companies have sophisticated methods of gathering statistical data to work out how long someone with a specific profile will live. The data reveals that life expectancy for females is approximately five years longer than their male counterparts. This longer lifespan means females will pay less as they will be paying premiums for longer, whereas companies will pay out benefits to males sooner.
• How does your driving history measure up?  Many life insurance companies look at your driving record during the application process. An insurance company will ask questions about your driving history and if you have any violations. Even if the insurer does not ask these questions during the application process, they will still have access to your records over the last three to five years. Insurers perceive drivers with a history of DUIs, reckless driving convictions, or suspended licenses as higher risks, and therefore the price of premiums is higher.
• Do you have a criminal record? A criminal record will impact your life insurance premium and possibly your eligibility. Some insurance companies will require a waiting period after a felony, in most cases up to ten years. After that, your record may still have a negative impact on your premium, where you could end up paying more for your policy.

KEY POINTS TO TAKE AWAY AND REMEMBER: 

• Life insurance is a vital financial help for your loved ones, but it is a massive investment and a lifetime commitment.
• Always confer with your insurance broker on the specifics and factors contributing to your premium payment. They can tell you about all the added costs and any discounts for which you may qualify.
• Age is everything! The younger you are, the less you will pay. Therefore, it is best to purchase life insurance sooner than later.
• Gender, although it may seem unfair, will have a significant impact on premium variants. Women will be offered a lower premium than men.
• It may be in your best interest to stop smoking if you want a lower premium. This is because insurers see smokers as high-risk individuals.
• The better your health and less risky your lifestyle, the lower you can expect your premiums to be. Of course, some elements of health are not in your control, but the ones affected by diet and exercise can be improved, meaning you may qualify for a lower premium should you make positive changes.
• If you do the crime, you must do the time! In addition, a criminal record can seriously limit your eligibility for a life insurance policy and your back pocket.

CAN I GET LIFE INSURANCE COVER WITHOUT A HEALTH EXAM?

Yes, you can. Some insurance companies do offer no-exam options for life insurance. However, you may be charged much more for coverage because the insurer has less information about you.

These are some examples and explanations of no-exam life insurance application procedures and policies that you can choose if you do not wish to have the health exam many insurers require:

• Instant life insurance – Typically, a life insurance application process can take thirty days, if not more. However, insurance companies increase their online presence with user-friendly websites and online applications. This tactic has led to faster underwriting processes that produce life insurance approvals within seconds. A side note to consider is that you need to be young and healthy to qualify.
• Simplified issue life insurance – This is slightly different than instant life cover, as you will be required first to answer a few health and lifestyle questions, but in the same way, there is no medical exam requirement. However, be aware that insurers may still use third-party sources to gather information about you. For example, insurance companies look for information like prescription drug history and your driving record. Bear in mind that, because of the risks associated with no exam requirements, a policy of this nature could be far more expensive than traditional life insurance.
• Guaranteed issue life insurance – As its name suggests, with this option, you will receive a guarantee of approval, no questions asked. The downside of this type of insurance will be extremely pricey. It may be beneficial only for those with terminal or extreme health implications who may not qualify for a traditional life insurance policy. If you are in good health, it would be best to avoid this type of life insurance.

ARE THERE DIFFERENT PREMIUM STRUCTURES, AND WHAT ARE THE PROS AND CONS?

Yes, there are different premium structures available to you.

Life insurance gets more expensive as you get older because you become more susceptible to injury or illness. This aging means that you are more of a risk to your insurer. Therefore, the insurer compensates because they may need to affect a payout sooner rather than later, resulting in a higher premium.

Fortunately, there are ways to navigate this issue to some degree. This stage is where stepped, level or hybrid premium structures come in.

Stepped premiums: The simplest way to understand a stepped premium structure is that it generally starts cheaper and becomes more expensive as you get older. So, your premium is not static but increases incrementally.

Pros:

• Cheaper than a level premium in the earlier stages
• It might be a beneficial option for those who may not want life insurance long term                                        

Cons:

• Ultimately, you could pay more in the long run as your premium increases over time, making it more expensive than a level structure

d premium.

• It could become too expensive to maintain when you get older at a time when you will need it the most. When you get older, you may not be in a position to cover a high premium making this structure unsustainable.

Level Premiums: As for a level premium structure, it helps to realise that they can be more expensive when you initially take out your policy. However, it will not increase as you age. The only factors that would change the premium cost would be lifestyle changes or inflation.

Pros:

• Monetary savings long term.
• Beneficial for those wanting long-term assurance that they are covered and protected.
• It is easier to budget because it remains more constant over the years

Cons:

• More expensive to pay for initially than a step structure
• In some cases, the insurer will require you to utilise a stepped premium structure (often after the age of 65), negating the effectiveness of your saving so far.

Hybrid Premiums: Not all insurers offer this premium structure, so it will be beneficial to inquire about it with your broker before setting your heart on this option. A hybrid premium structure can offer you a combination of level and stepped, which means you would start with a more expensive premium than your typical stepped premium, but cheaper than your level ones.

Unlike the other two single options, it will increase for a set period and eventually be locked into a rate once you reach a predetermined age.

WHICH ECONOMIC FACTORS MAKE MY PREMIUM INCREASE, AND IS THERE ANYTHING I CAN DO TO PREVENT THIS?

There are three main reasons your life insurance premiums go up incrementally over the years. Some are completely out of your control, except for indexation, as economic factors are not in your hands, and there are no measures you can take to prevent them.

Here are a few factors explained:

• Indexation is the term used to refer to an automatic increase in the sum or benefit amount insured. This increase enables you to keep up with inflation so that, over time, the insured amount will be enough to pay for future current living costs. It is, however, an optional feature. Although it is great if your needs stay the same over your lifetime, if it decreases with age or circumstances, you may want to think about reducing them.
• Insurance industry factors – A vital aspect or task of an insurance company is that it must ensure that the premiums collected from policyholders are at a sufficiently high level to pay claims when submitted. This commitment means that the broader environment in which an insurer operates can determine the cost of your insurance. As time goes by, the insurer will need to reprice products offered to reflect industry risks and ensure the sustainability of the products themselves. In that way, the insurer can deliver to the clients they cover for the long haul.
• Broader economic factors – Insurance companies, just like any other business enterprises, are susceptible to economic factors that may impact the premiums you pay. For example, the Reserve Bank of Australia experienced an extreme dip in cash rates over the last ten years, negatively impacting life insurance companies. This situation occurred because the insurer typically invests customer premiums in cash or other interest rate-linked financial instruments such as policies with level premiums.

As economic factors are not in your control, you will see an elevation in your premium costs over time. However, you may be able to pay a lower premium by doing a few simple things. Always ask for expert advice from your insurance broker as they can help acquire the lowest premium possible for you and your family’s needs. You may want to see if they can assist you with the following:

• Removing some extra-cost and lower priority options you may have on your existing policies
• Assist you in changing your amount insured or benefits to a lower, more affordable amount
• As indexation is optional, you can decline its renewal in the next year, after which the insurer will not implement an increase on your level premium structure. However, your policy will then not protect you against inflation.

We can offer you a straightforward, comprehensive, objective, and hands-on approach to comparing family life insurance options from our leading insurance. We will facilitate you with each step of the process and adequately equip you with enough knowledge to make an informed decision that best suits your unique situation and budget.

We are eagerly awaiting your call. Help us help you make a meaningful difference in your life and that of your loved ones.