Family life insurance is most recommended when you are the main source of family income, as it will protect your children and other dependants from facing financial difficulties should you no longer be able to work. Therefore, it is your responsibility to take out life insurance to meet family needs when you’re not around.
Family life insurance is also worth considering for the parent who is not the primary breadwinner, as it can cover their contribution as a family chef, chauffeur, and caregiver. In addition, a family life insurance policy can help stay-at-home parents secure their family’s future.
Before deciding how much life insurance you need, it is worth doing calculations that consider your family’s specific financial goals. These goals may include paying off the mortgage and covering school fees.
Life cover comes with many different features and benefits. Depending on your circumstances, what attributes do you want to include in your life insurance? Let us know what you need, and we will help you get the life insurance benefits to provide for your family.
Learning more about family life insurance
Whether you’re expecting a child, taking a mortgage, or just moving in with your partner, many important milestones in life don’t just need emotional but also financial support. With all these responsibilities that you carry, it’s important to stop and think about how your loved ones would survive when you’re gone. Of course, the emotional burden would be immense but a financial crisis can make any situation much worse.
With family life insurance, you can take comfort in the thought that they will at least be financially secure when you’re no longer there to look after them. It’s just wise to protect the people who matter the most to you.
If you have someone who depends financially on you, it’s important to consider family life insurance. If you couldn’t provide for your family, how would that affect them financially? With a lump sum payout, they can continue their lifestyle, pay off debts, and manage other expenses. Family life insurance is an extremely important tool to help your family live the life you planned for them.
In the event of you suffering from a terminal illness, a payout can help you manage the expenses when you’re still around and plan a life for them for when you’re gone.
Family life insurance can be of an individual or joint with your partner. With an active policy, you can relax and know your family is protected under the insurance cover.
Terms you need to know
Here are some terms you need to know when it comes to family term life insurance.
Waiting period: Once you’ve bought a policy, there is some time for which a claim cannot be made. This is usually from 30 to 180 days. If you take out a policy and an unforeseen incident happens in the waiting period, the insurer will not accept the claim.
Accidental death cover: This is a type of policy in which you get insured only in the event of accidental death.
Beneficiary: A beneficiary is the recipient of the benefit or payout of the policy in event of your death. It could be a spouse or a child, or anyone you want to be named on the policy.
Claim: Claim is the process in which your beneficiaries request the payment of the policy.
Exclusion: Some issues are excluded from the policy. For example, if you suffer from a serious ailment, your policy request might get denied.
Expiry: The duration of the policy is written on the document. After that duration is over, the policy is said to have expired.
Lapse: If you don’t pay your premiums for a specific time, your policy will lapse. Once the policy lapses, you won’t be covered by it.
Non-disclosure: If you haven’t supplied correct or full information, your policy may become void due to non-disclosure.
Types of life insurance in Australia
There are six main types of life insurance in Australia. If you’re planning to get family protection life insurance, it’s important to understand all of them so you can make the right decision. Let’s cover all of them briefly here.
Life cover (also called death cover)
It gives lump sum benefits in the event of the demise of the insured. If you get a term cover as well, it will protect your family in case of your terminal illness. The eligible age for this insurance is 18 to 79 years.
Income protection insurance
With this insurance, you get ongoing benefits every month. These benefits can be a maximum of 70% of your regular income. It covers your expenses when you’re temporarily unable to work due to an illness or injury. The eligible age for this insurance is 18 to 64 years.
Trauma cover will offer protection in case of trauma such as a stroke. It is paid in a lump sum and will help you cover your medical costs along with the living expenses of you and your family. The eligible age for this insurance is 18 to 64 years.
Total permanent disability cover pays you in a lump sum in case you suffer from an illness or injury that makes you permanently disabled. This insurance will cover your medical and living expenses. The eligible age for this insurance is 18 to 64 years.
This insurance gives your family enough money to hold your funeral when you pass away. You get a fixed cover (usually from $5000 t0 $15000). It pays in a lump sum and the eligible age for this insurance is 18 to 79 years.
Accidental death insurance
This provides protection in case you undergo an accident and get injured or die. It pays out in lump sum and helps your family cope with the financial loss. The eligible age for this insurance is 18 to 64 years.
Out of all these insurance types, family life insurance is possibly the most comprehensive and the number one choice of most Australians. As more people realise that they have to protect their families from financial hardships even after they’re gone, they opt for a family protection life insurance.
Financial freedom for your family
In case of an unforeseen event, people usually have to use up their savings. And if they don’t have any savings, they might have to take loans from their friends. And some people don’t have anyone to ask.
The best life insurance for young families will help your family stay financially covered when they face difficult situations. It’s a wise idea to be proactive about insurance so your loved ones stay secure. Getting insured will take that weight off your shoulders and give you peace of mind.
How family life insurance works
Family life insurance is like other insurance covers. You can enter your basics at our website and get a quotation. Depending on your preferences and requirements, you can select the best life insurance for young families.
You can buy the policy and the insurer will agree to pay your family a certain amount when you pass away or face a terminal illness. Meanwhile, you’ll have to pay a certain premium on your insurance. Depending on the policy, the premium may stay the same throughout the policy or it may increase over time.
When you purchase a policy, make sure you understand the terms and conditions and how to make a claim. You should also know under which circumstances your claim will be approved or denied. At Wealth Smart, we’ll help you understand your policy better so you can make an informed decision.
How much family protection life insurance do I need?
A family life insurance cover will depend on your lifestyle and expenses. Since different people have different circumstances, your best family life insurance will differ from someone else’s.
Here are some things you need to take into account when calculating how much family life insurance you need.
- Living expenses: Find out how much your family spends on food, clothing, rent, bills, education, etc. Arrive to an average annual figure.
- Outstanding loans and debts: Have you taken a loan or debt? Are you paying for it each month? How much of it is still outstanding and how will your family be able to repay it if you’re gone?
- Financial safety: How much savings do you have? Do you have any assets or other insurances that might help your family when you’re gone?
- Cover period: For how long do you want to be covered? You need to decide this based on your household income, the size of your family, and the total savings you have.
Keep all these factors in mind to arrive at an average yearly figure. Based on this figure, calculate how much money your family will need before they find another regular source of income in event of a loss. Talk to us and we’ll help you find the best life insurance for young families.
What’s the cost of life insurance?
The cost of life insurance premiums is nothing compared to the benefits they offer. If you’re looking for affordable life insurance for families, get a quote from Wealth Smart according to your needs and preferences.
Here are some factors that determine the cost of life insurance: claim amount, age, health status, and smoking habits.
If you want a high claim value, you’ll need to pay higher premiums. Premiums also get high with age. People with serious health issues might be denied an insurance policy. Smokers have to pay higher premiums than non-smokers.
Here are some details all insurance companies will want from you because they determine the quotation of the policy you’re looking for.
- Sum insured: This is the main factor for determining the premium you’re going to pay. If you’re looking for a big payout, you’ll need to pay bigger premiums.
- Type of cover: Some policies offer more comprehensive cover than others. Policies that offer more benefits and cover will need higher premium payments.
- Features of the policy: If you get optional add-ons or special features, your policy premiums will be higher.
- Premium structure: There are different premium structures such as stepped, level, and hybrid payments, and your premium will depend on that.
- Your health and age: If you’re young and healthy, your premium will be lower than if you take the policy when you’re old and/or ill. If you have a serious or life-threatening condition, you might not be eligible for family life insurance.
Interested in affordable life insurance for families? Let us know and we’ll be able to help you out. Our experts will understand your needs and expectations and offer you the best family life insurance.
Reading the fine print
Whenever you sign any documents, it’s important to read the fine print. The same goes for family life insurance policies. When you pay the premium, you are rightfully entitled to the claim. However, if you’re not honest with your insurer while purchasing the policy, your family might be denied the claim.
Make sure you give all your details honestly. This is the duty of disclosure – you’re expected to answer the insurer’s questions honestly so you can benefit from the insurance when it’s needed.
Here are some questions they may ask you:
- Details of your medical history
- Details of your family’s medical history
- Your occupation
- Your monthly/yearly income
- Your hobbies and if you play any dangerous sports
You may be tempted to lie about your health to get lower premiums but this might later lead to claim denial.
Make sure you read the disclosure statement. It’s a long document that discusses what’s covered along with what’s excluded. It also mentions the waiting period. Make sure you read this and understand what’s included in your policy and what’s excluded. If you’re unable to understand your disclosure statement, talk to us. Our experts will help you understand the policy completely so you’re able to make a well-informed decision.
When should I get life insurance?
Life insurance is important for everyone as soon as they turn 18. However, most people think about insurance when they hit an important milestone in their life such as buying their house, having their first child, or getting an expensive asset.
Yes, it’s best to start young. But as your needs change when you age, you might start thinking about insurance more seriously. However, it’s easier for young people to get insurance because they are healthier. Also, their premiums are lower so many people decide to start early.
How are the benefits delivered by the family life insurance company?
Family life insurance benefits can be delivered in a lump sum. Such a payment can help your family get rid of your debt such as medical bills or mortgage. However, if you’re looking for regular payments, you can get other types of insurance, such as income protection insurance.
In an income protection plan, you’ll get the benefit when you become temporarily unable to work due to an illness or injury. Your benefits will be delivered to you every month so you can continue your lifestyle even when you’re unable to continue working.
Things you should know before you apply for family life insurance
Here are some things to keep in mind when you’re planning to buy a policy.
How much you’re covered: Ideally, you should be covered for 10 times your annual earnings. However, you can choose a different amount depending on your preferences.
Be honest: Lying in your application may result in the voiding of your policy and thus your family wouldn’t get any claim. Also, there won’t be any refund of the premium you paid.
Calculate a premium breakdown: Life insurance gets more expensive when you get old. When you opt for a policy, you might have to pay premiums for decades. Get a policy with a premium you can afford down the line.
Capping of benefits: Your earnings and medical history are also important in deciding the benefits you’re eligible for.
Beneficiary: Your beneficiary should be someone you would want to secure financially.
The pros and cons of family life insurance
- Your family will be protected if you face a sudden demise or are diagnosed with a terminal illness.
- Life insurance benefits can be tax-free depending on your individual policy.
- Your life insurance benefits can also cover your funeral costs.
- If you get insurance young, your premiums will be low
- You’ll need to make regular payments towards the premium.
- The claim process might take a few days
- Some cases might void the policy so read the documents carefully.
Bundled v/s standalone family life insurance policies
When you get multiple policies, you can get them as standalone or bundle them together. Let’s understand both types.
When you take different policies separately, they are called standalone policies. Each policy will have an individual sum insured and you can make claims individually.
You can get different types of covers from different insurance companies. This gives you more flexibility.
For example, if you don’t have a family, you might not want family life insurance. However, you might want trauma or income protection insurance. You can take two separate policies for that.
- A wide range of insurance companies to select from
- These policies are easier to customise
- You’ll need to pay multiple premiums
- Separate policies might be more expensive
Bundled insurances are a group of several insurance products. One of them is a family term life insurance and there are other covers along with it. The insurer will pay you a single sum and if a part of the policy pays out, your benefits will be reduced.
For example, if you have a bundled policy that has life insurance and TPD (Total and permanent disability) covers. The total benefit amount is $100,000 and the TPD amount is $50,000. This means that if you become disabled, you’ll receive $50,000 but if you die, your family will get $100,000. However, if you claim TPD first and then die later, the payout will be $50,000 on your death because you’ve already claimed $50,000 for TPD.
- Lower premiums
- Covers for a bigger list of eventualities
- Only one premium for all the bundled policies
- Only one sum insured
- Not very customisable
- You can’t combine the insurance policies of several companies
Stepped premiums v/s level premiums
The common notion about family life insurance is that it gets expensive as you age. This is true in many cases because older people are riskier to insure. The good thing is that you can select the right premium payment process according to your preferences.
Stepped premiums are cheaper initially but become expensive with age. The initial premiums might attract you but they will get costlier with each passing year. This makes stepped premiums a more expensive option than level premiums.
- It offers cheap initial premium rates
- A good option for people who want family life insurance for a small duration
- Over the life of the policy, the premiums rates become higher
- It can become very expensive in your old age when you need the policy the most
When you buy the family life insurance policy, you might find level premiums to be more expensive. However, since stepped premiums increase over time, level premiums can be cheaper in the long run.
- It saves money in the long run
- A good option for people who want family life insurance for long term
- Easier to create a budget because you know exactly how much you’ll have to pay
- Initial payments are more expensive
- When you end up on stepped premiums, your savings can get eroded
There is a third way to pay your premiums – hybrid premiums. These are a combination of stepped and level premiums. Their initial payments are between level and stepped. This means they are more expensive than stepped but cheaper than level in the beginning. It increases just like stepped premiums but after a certain time, the rate is locked in. The problem with hybrid premiums is that not every insurance company offers them.
- Initial rates are cheaper than level premiums
- Overall costs are cheaper than stepped premiums
- Not available with every insurer
Consider these factors when selecting a payment plan
- When you get hybrid premiums, try to get them locked in at the earliest to turn them into level premiums. The sooner you lock in, the more you’ll save in the long run.
- It’s easier to do budgeting with level premiums because you’ll know exactly how much you’re going to pay.
- Level premiums have a low maximum age to start a policy than stepped premiums.
Are there any tax benefits on family life insurance?
Most life insurance policies are not tax deductible. According to the Australian Tax Office (ATO), if a policy has benefits for physical injury, its premiums are not tax deductible. Family life insurance outside super isn’t tax deductible. However, when it is inside super, it can become tax deductible in some cases.
Direct life insurance premiums are generally not tax deductible. So when you file a tax return, you cannot request reimbursement of premium payments. But when you get family life insurance through superannuation, your premiums come from the superannuation fund, which might have pre-tax contributions.
Let’s discuss the tax implications that you should keep in mind while getting not just family life insurance but other insurance products as well, especially as you become older.
According to ATO, personal life insurance policies cannot be tax deductible. To make them tax deductible, you can have a group policy that is handled through superannuation. In the case of super, your fund will pay towards a third-party insurance company on your behalf. Thus your fund can claim tax payments, depending on the way your contributions get funded.
Keep in mind that family life insurance through your super might not offer the same benefits as when you get a direct policy. This might lead to you getting underinsured. In some cases, payouts or claims can get taxed. Consider all these factors while selecting a plan.
Benefits such as total/permanent disability covers are not tax deductible so when you get these benefits, they cannot be used to claim deduction while filing tax returns. You can get a group insurance policy but the downside of that is that benefits received from a group policy can get taxed in some instances. This is especially true if you haven’t reached the preservation age mentioned in the superannuation law.
The exception to this rule is income protection insurance which lets you claim tax benefits on premiums. This is done by the Australian government to help you get self-sufficient when you cannot work.
If you have a family protection life insurance outside super that also provides income protection cover, you might be able to get a tax deduction on premiums. This is the main difference between having income protection inside and outside the super fund. Family term life insurance that protects you against injury (including trauma, TPD, and death) cannot have tax deductible premiums.
Are the benefits of family term life insurance taxed?
If the policy pays benefits in a lump sum to either the policyholder or their spouse or dependent child, it is generally tax free, without regard to whether it is inside or outside the super funds.
If the policy is held inside the super and the benefits are paid to a dependent beneficiary, the receiver of the benefits will have to pay taxes on the benefits they receive. Whether they will receive any tax benefits will depend on their specific circumstances.
Since the tax benefits are different for different policies and circumstances, it’s best to discuss these things with a specialist. If you want to know if a particular policy will give tax benefits on the premium or the benefits, discuss your concerns with our experts. We will be happy to guide you so you can get the best life insurance for young families.
What to consider before buying the best family life insurance
A family life insurance is a product that will stay with you for many years to come. Make sure you consider all important points before you settle on one.
To begin with, make sure you read the disclosure agreement carefully. It might be a long read but it will help you arrive at an informed decision.
Make sure you read the following points mentioned in the PDS:
- What is covered in the policy and what is excluded
- What kind of information is required by the insurance company
- How much premium payment do you have to pay and how frequently
- The time you have to wait before you can make a claim
- The process of making a claim and how long it takes for the benefits to be paid
Apart from considering these points, also find out if you are already entitled to life insurance through your super fund. If you are, you don’t have to pay twice for the insurance.
How to find the best life insurance for young families
If you’re young, it’s the best time to get life insurance because your premiums will be lower. You can even get level premiums at low rates. And the best part is that these premiums will not increase throughout the policy.
To find the best family life insurance policy, enter your details and benefit expectations on our website. According to those details, we will suggest the best and the most affordable life insurance for families.
How to file for a claim towards a family life insurance
To file a claim, your beneficiaries need to discuss things with us and we’ll guide them better. If you’ve taken insurance through your super fund, they have to contact your fund to learn about the claim process. If you have family term life insurance through your employer, they will have to discuss the company rules to understand the claims process.
However, when you take insurance from third party providers such as Wealth Smart, we are always here to help and guide you or your family so the claim process becomes easier and smoother.
Information you need to provide
Family life insurance benefits can be claimed under two circumstances: if the insured is deceased or the insured is suffering from a terminal illness. Depending on the type of the claim, you or your beneficiary will have to provide these documents to file for a claim.
- Medical reports and/or medical results from a licensed doctor
- Tex returns and/or financial statements
- The death certificate and medical certificate mentioning the cause of death
Your insurer might want to contact your doctor before they give the claim amount. They might want you to get tested by their medical practitioner before they give you the claim money.
If you’re the beneficiary, you’ll need to inform the insurer that the insured has passed away. Make sure you have the policy information including the policy number and identifying details of the nominated individual.
The insurance company will then give you the details you need to provide. It might just be a death certificate. And in case of accidental death, they might need more information. You will generally get a claim consultant to guide you through the process. They will help you in the filling of forms and let you know if you have to submit more documentation.
Claim process time
Most claims of family term life insurance are paid out within two to three weeks. Some of them take eight weeks, depending on the situation. Occasionally, some cases take up to six months. These are very rare cases.
How to get the best family life insurance
The best insurance would probably be the one that covers most cases and gives the best claim. Here are some features you might want in your family protection life insurance policy:
- Terminal illness benefits: Under this cover, you’ll get benefits if you’re diagnosed with a terminal illness and have fewer than 24 months.
- Pause payments: With this feature, you can temporarily pause premium payments if you face financial issues during the lifetime of the policy.
- Premium freeze: This means your premium will not increase with age. However, the lump sum received by your beneficiaries might decrease.
- Funeral advancement: This includes a quick initial payment so your family can arrange for your funeral. The remaining benefits can come later.
- Inflation indexation: The benefits you get from the claim are adjusted according to inflation. So with inflation, the benefits of your policy will get more.
- Joint protection: You can group your policy with your spouse and this can give you both some discounts on your premiums.
- Grief support: The insurance company provides grief counselling and/or PTSD treatment to the beneficiaries.
- Financial planning: The insurance company offers expert guidance to help your beneficiaries plan their finances carefully.
- Long distance accommodation: If you’re diagnosed with a terminal illness and an immediate family member has to travel to meet you, this cover will pay for their accommodation expense.
- Repatriation: If the insured person dies outside Australia, the insurance company will pay some extra amount.
For example, if your life cover is for $500,000 and you set apart $15,000 as funeral advancement, your beneficiaries will immediately get $15,000 to help them with funeral costs while the company assesses the claims and pays for it.
Apart from this, some insurers also provide a cover continuation guarantee. This means that once you buy the policy and as long as you continue paying the premiums, we guarantee that your family life cover will continue until you reach 99, no matter how your health changes.
If you’re looking to add on another cover to your family life insurance policy, discuss it with us and we might be able to get you the exact product you’re looking for. Keep in mind that the more benefits you add, the more premiums you’ll have to pay.
Who controls family life insurance in Australia?
The life insurance sector in Australia comes under the Life Insurance Act of 1995. This act protects the interests of insured persons or groups of persons. It also makes sure insurance providers are safe from fraudulent claims, thus maintaining the commercial viability of insurance companies.
While the legal jargon of the act can be difficult to understand, here are the main goals under it:
- Insurance companies keep their communication channels open and customers can learn about the policy before buying
- When policyholders claim rightfully, they should receive the appropriate benefits as promised to them while selling the policy.
- Under the supervision of ASIC and APRA, insurance companies can intervene to protect the interests of policyholders if they suspect poor management.
- Only registered insurance providers can sell family life insurance policies
What are some common exclusions?
Like any other insurance policy, a family life insurance policy will also have some exclusions. They will put restrictions on your cover. Some general exclusions are present in all types of insurance covers. Some insurance companies have these exclusions mentioned in all their products, regardless of your health, wellbeing, and circumstances. And then some others have specific exclusions for different types of policies. Here are some common exclusions:
Criminal activity: If the insured individual dies because they were engaged in criminal activities or because they broke a law, the insurance cover is voided.
Self-harm and suicide: Your family life insurance policy will not pay if you’re found to be involved in suicide or self-harm. Many insurance companies have specific clauses regarding this exclusion. For example, if someone takes a policy and attempts suicide within a specific period (generally the first 13 months), it will void the policy.
Death within a time frame: In some cases, if the death occurs very close to buying the policy, some insurance companies might offer premium reimbursement instead of the claim amount. Make sure you read the fine prints before you take the policy. At Wealth Smart, we are always here to guide you. Discuss all these details with us before buying an insurance product.
Reckless behaviour: If the death is caused by reckless, negligent, or irresponsible behaviour, it will not be covered in the policy. Please study the exclusions on reckless behaviour by reading the policy documents. One common example is drunk driving. Apart from that, deliberate unsafe driving or not taking necessary precautions is also called reckless behaviour. The definition of reckless behaviour might be different from one insurer to another.
In most cases, insurance companies will have exclusions if you have some pre-existing conditions, occupational hazards, or if you engage in high risk activities. It’s important to read the policy disclosure agreement so you understand exactly what you’re covered for.
If you have any condition or circumstance that might be an exclusion, it’s best to discuss this with the insurer. If you hide a fact today, it might lead to your claim being voided later. Some common conditions can be high cholesterol, depression, heart ailments, asthma, etc. If you don’t disclose your condition and the insurer comes to know about it during the claim process, this will lead to the policy being voided and your premium payments would be lost.
Who gets the benefits of family life insurance in Australia?
For any type of insurance, the claim payment will go to the individual insured. In case of a terminal illness, you will receive the benefits of the policy. However, in case of death, the sum assured will go to your beneficiary, as mentioned in the policy document. This beneficiary will usually be your spouse or your child.
When you purchase a policy, you’ll be asked to nominate a beneficiary. This beneficiary will receive benefits in case of your death. Make sure you nominate someone who is financially dependent on you. If you want multiple beneficiaries, that can be done as well.
During the term of the policy, if you want to change the beneficiary, you can do it easily. Just let us know about the changes and we’ll help you out.
What is the automatic sum insured increase?
This is a special feature that might be present in your policy. The sum insured can rise each year as the costs of living increase. This will be good for your beneficiaries as the insured benefits will be higher than what was mentioned in the initial policy document. However, this will also result in rising premiums.
Insurance companies will let you know whenever they increase your sum insured and premium. If your policy includes this and you don’t like it, you can decline it.
Keep in mind that not all family life insurance policies come with an automatic sum insured increase. Also, not all policies offer terminal illness cover. If you’re looking specifically for terminal illness cover with family term life insurance, discuss it with us and we’ll be able to suggest you the right policy according to your needs.
Can children be covered under family life insurance?
Many policies allow you to add children’s insurance cover to your family life insurance policy. This cover will pay you lump sum money if an insured child is diagnosed with a terminal illness or passes away.
Children’s cover is usually applicable to kids aged 1-18 years and the cover might extend until they turn 21. This cover insures the child against accidental death, death due to illness, or diagnosis of a terminal disease. There might also be a range of injuries or illnesses mentioned in the policy. Make sure you read the documents before signing the policy.
Several insurance providers offer trauma cover apart from child cover. This will cover your child against a trauma as mentioned in the policy documents. This cover can be purchased by their parents, guardians, or grandparents.
Getting family life insurance when you have a pre-existing condition
If you have a pre-existing condition, it’s best to discuss it with the insurer before you buy a policy. For example, if you are suffering from HIV, can you get life cover? Most insurance providers will not provide cover for HIV since it’s a high risk condition.
Some insurers might offer you insurance but they would need extra payments apart from your premiums. Or the policy might offer you life cover but wouldn’t cover death due to your condition. When you disclose your condition to the insurer, it is kept confidential and your sensitive data is kept private.
What is the maximum family life insurance cover I can get?
Your life insurance policy depends on several factors. Depending on your age and salary, you can get benefits that might cover up to 20-25 times your annual income.
Some shoppers believe that they can get any coverage they want. For example, you might think getting a cover of $5 million is super easy. It’s not. It depends on your income, age, and health conditions.
Before they give you a policy, the insurance company will check your health status. They will not give you excess coverage because this will cost them a lot and make the insurance company unviable. The insurer will not give you coverage that is greater than the economic loss faced by your beneficiary in case of your death.
They have to do this to protect the financial interests of their company. Let’s see how much cover you can get depending on your circumstances. Some factors that can affect this amount are your job/business, your family needs, your age, etc.
The money your beneficiaries receive after your death can help them handle several expenses such as:
- Replacing the lost income
- Paying for children’s college fee
- Paying off the mortgage
- Running your business after you’re gone
When you buy a policy, you might hear the term “justification.” This means the company wants to justify the amount you want as cover. For this, they will consider your annual income and your net worth. If you earn little, you cannot be promised a $1 million cover.
Let’s say the maximum an insurer can offer you is 25 times your annual salary. So for example, if you earn $30,000 per year, your maximum insurance cover will be $750,000. And if you earn $250,000 per year, your maximum insurance cover will be $6,250,000.
However, keep in mind that to get the maximum cover you’re eligible for, you’ll need to pay a higher premium. You don’t have to get the maximum cover. For a lower cover, your premiums will be lower. Work your premiums in your budget to find the most affordable life insurance for families.
How much family life insurance should I have?
Enter your details and expectations on our website and we’ll give you a free quotation. But the amount of insurance you need depends on your expenses. If you’re employed in a job that pays for your family insurance, you don’t have to worry too much. However, if you’re self-employed or your employer doesn’t pay for your insurance, you’ll need to pay a separate cover.
Let’s say you have mortgage expenses of $200,000, student debt of $75,000, auto loan of $30,000, and estimated funeral expenses are $15,000. In such a case, the total will be $320,000.
Given this scenario, it would be wise to get coverage of $400,000 so your beneficiaries can take care of the basics. Also, take your savings into account. If you already have $500,000 in savings, you might not need to pay high premiums.
Some immediate expenses your family might have to incur in case of your demise might be medical charges, funeral costs, personal loans, business-related debts, estate taxes, kids’ college funds, mortgage, etc.
Consider this formula:
Life insurance cover required = (Future income + Immediate obligations) – Existing savings and other resources
This will help you arrive at an amount according to your needs.
How long should the insurance last?
Most family life covers end at 70 years of age. These covers can last for a few decades but what is the right duration of life insurance for you? Consider these points when selecting the duration for life insurance.
- How many years will it take for all your children to be independent?
- How long will it take until the mortgage payments are completed?
- How many years will it take for you and your spouse to retire?
- What other long term obligations you have and how long will they take?
Let’s say your mortgage is due for the next 12 years and your child will be dependent on you for the next 3 years. You and your spouse will retire in 15 years. You’ll need a policy that lasts for 20 years. This will keep you covered until your debts are paid off and you can have peace of mind.
However, you might not get exactly what you want. The insurance company will consider your age and health status before giving you a policy. Discuss your needs and expectations with us and we’ll be able to give you the best life insurance for young families.
Frequently asked questions regarding family life insurance
Q: Will I be covered for Covid-19?
Most family life insurance policies do not contain specific policy exclusions for Covid-19. When you apply for a new policy, the insurer will assess your health conditions along with your lifestyle details. Most policies are voided if they detect reckless behaviour. So when the Australian government advises people not to travel to other countries, follow those instructions. If you disobey the government and travel abroad and as a result catch Covid-19, your policy might get in trouble.
Q: Will frontline healthcare workers be charged extra since they are at risk?
Most insurers will not charge extra. If you’re a frontline healthcare worker such as a doctor or a nurse, insurance companies will make sure you and your family are covered with the best family life insurance. If you’re serving Covid-19 patients, let your insurer know before you buy the policy because failure to do so can void the policy later.
Q: What are the limits of buying life insurance?
If you’re an Australian citizen and a permanent resident here, you’ll have access to family life insurance as long as you satisfy the criteria laid out by insurance companies. The minimum and maximum age limits for life insurance can be different for different providers.
If you’re a non-Australian, you still might be able to purchase family insurance if you meet certain factors. These factors consist of the country you’re a citizen of, how long you’ve been in Australia, how long do you wish to reside in Australia, your travel plans, etc.
Q: Can the insurance company cancel my policy?
Your insurance provider might want to cancel your policy depending on certain factors. For example, they can cancel your policy if:
- You don’t pay premiums
- You didn’t disclose important information related to your health or lifestyle during the application process.
- You made a fake claim.
- You didn’t comply with the terms and conditions of the policy you purchased.
Q: Can I cancel my policy?
You can cancel a policy if you no longer want to stay covered. A policy will cease to run if you stop paying the premiums. However, it’s best to do it properly. You’ll need to submit an application mentioning why you need to cancel the policy. In most cases, the application will be processed within two days and the policy will be cancelled.
Depending on the provider, you might be able to pause the policy and then reinstate it later within a specific period. Discuss your needs with your provider and if you cannot pay premiums for a temporary period, it’s best to pause the policy instead of cancelling it.
If there is something you don’t like about the policy, discuss it with us and it might be possible to get it changed instead of cancelling it.
Q: Can I have more than one family life insurance policy?
Yes, you can have multiple policies. And you can claim each one of them as long as you meet the conditions of each policy. However, when you get a new policy, it’s best to disclose to the insurer that you have other life insurance policies running as well. Keep in mind that having multiple policies will mean paying multiple premiums.
Q: Whom can I contact to discuss the details of family life insurance?
We are always here to assist you regarding your insurance needs. Just call us at 1800 765 100 or email us at [email protected] for an affordable life insurance for families. We are also available on social media including Facebook, LinkedIn, and Twitter.
HOW TO TAKE OUT A LIFE INSURANCE POLICY ON A FAMILY MEMBER?
Yes, you can take out a personal insurance policy on behalf of a family member. You can also declare yourself as the policy owner and specify your family member as the life insured.
This person will always need to consent and complete the initial application, but the sum insured is paid to you, the policy owner. To obtain this type of term life insurance, you will also be responsible for policy premium payments.
HOW TO TALK TO YOUR FAMILY ABOUT LIFE INSURANCE?
Life insurance can be a complex topic for families to discuss openly, especially where terminal illness is involved. However, this complexity is where a financial adviser can assist.
Because the life insurance industry deals with life, death and financial security, we can provide you with the necessary information and advice to open a conversation with a loved one.
If one or both parents is elderly or suffering from a terminal illness, your family will need financial support to take care of them before and after they pass away. Because insurance companies also deal with life insurance products daily, they are your best resource to discuss the future.
We understand that opening this type of sensitive conversation with loved ones is difficult, but we can ease the process with our advice. In addition, we can provide you with tips, information, and life insurance quotes.
Armed with this knowledge, you can let loved ones know exactly what to expect, using the information from a qualified financial planner. And when you’re ready, we can take you through the rest of the process to understand how much coverage you need before we write up your insurance contract.
In this document, life insurers will specify the benefit amount (how much money the beneficiaries will receive, or at least the percentage due to inflation and costs). From there, you can decide whether to insure the entire family or just one member.
HOW CAN I FIND OUT IF A FAMILY MEMBER HAD LIFE INSURANCE?
Unfortunately, there is no register for existing life insurance policies like with super. If your family member had a life insurance policy, they would have received an annual policy statement at minimum. The best place to check may be their email address or documents in the home.
Should you discover such information or documents, you can contact the insurance company to learn how to claim any potential sum insured.
WHY YOUR FAMILY NEEDS A LIFE INSURANCE PLAN?
There is a long list of reasons to take out a life insurance plan for your family. The most common need for life insurance is the benefit amount, which can settle the mortgage on the family home.
For example, if you are the primary breadwinner and your family rely on your income to cover daily expenses, your death will cause significant distress. They will no longer be able to cover mortgage repayments or meet other financial commitments. Having death cover will resolve this problem largely, as a lump sum will provide them with the resources they need to continue life without you.
It can be challenging to talk about and even think about, but if your income was no longer available to your family, how would they cope with ongoing living expenses and mortgage payments?
Life insurance policies are designed to cover death or accidental death. So, consider the maximum sum insured on your policy, add child cover, and consider all your options regarding family expenses to avoid the pain of being without necessary financial support.
When you plan for your future and your family’s well-being property, you can even eliminate all your debt in the event of your death. Essentially, taking out a life insurance product of this nature is planning for your family’s welfare when you’re no longer there.
So, seek advice from the experts. Our authorised representative will help you plan for the worst-case scenario and the unexpected to make sure your family can endure without you.
HOW DO I GET LIFE INSURANCE FOR MY FAMILY?
You can take out life insurance for yourself and get child cover. As much as it is painful to consider this option, children’s insurance is vital to the entire family. The policy can be set up to have an owner who pays the premium and would receive the claim payment.
The lives insured can be your family members. Your family members would be required to complete their application when the policy is initiated, but all correspondence would be sent to the policy owner annually.