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Life Insurance

What You Need to Know About Death Insurance

29 Jun 2022

Life Insurance by Life Stage

The choices you make today can impact your long-term health, wealth and happiness. Understand the important role Life Insurance can play in key life events.

What happens if you can’t take care of your family anymore? How can you prepare for something worse than permanent injury? Death insurance can help offer a solution to potential problems down the road.

The term ​‘death insurance’ isn’t as common as the term ’Life Cover’ or ‘Life Insurance’. It sees less use, yet its meaning is essentially the same. In fact, the terms are often used interchangeably. In other words, death insurance or death cover is often known as ’Life Cover’, ‘Life Insurance’ or ‘Life Insurance Cover’. To keep things confusing, strictly speaking the term ‘life insurance’ includes a range of life insurance products (such as life cover, income protection cover , TPD and trauma insurance cover).

Death insurance is a specific type of coverage that helps protect your beneficiaries by providing a lump sum payment in the event of your death.

To find out if death cover is right for you, it may be helpful to learn about key basics first.

What Is Death Insurance?

With death insurance you can nominate your beneficiaries as recipients to receive a lump-sum payment.

Some companies offer death cover policies of up to $2 million, or more. It depends on how much the policyholder wishes to pay, underwriting considerations and how much cover the insurer can – or is prepared to – offer.

In most cases, policyholders want to make sure that they can take care of their beneficiaries financially, even after their passing. For example, the money from a death insurance claim can help pay off debts, such as credit card balances, loans, and a mortgage.

It can also go towards childcare, as an additional financial safety net on top of the usual inheritance.

Often, death cover benefits have the primary goal of helping others after the death of the policyholder. And you can make a Life Insurance claim even in the event of untimely death.

If the insurance company’s terms accept the cause of death as within policy coverage, then the validly nominated beneficiaries can make a claim.

Funeral Insurance

There are a range of life Insurance product types and often a variety of extras or options that you can bundle. Term Death Insurance (more commonly known as ‘term life insurance’ or ‘life cover’) and funeral costs insurance are both life insurance products but are quite different.

Funeral costs Insurance is typically a funeral-only insurance policy. In this case, the insurance covers funeral expenses up to the insured sum which is generally limited to much lower amounts of cover than death insurance (term life cover). On the other hand, as described above, term death insurance is a policy that benefits beneficiaries and pays a lump-sum amount after the policyholder’s passing.

Covering only funeral expenses can also be a good idea, depending on your circumstances. It could make good sense when family members don’t live in the area anymore, or when the insured doesn’t have enough money to pay for a larger death insurance policy.

Depending on the terms of cover, funeral expenses may also cover some travel costs for family members, alongside funeral directors and other fees.

However, one of the big differences between life cover and funeral cover is this: You may be able to allow for all the expenses associated with funerals with a life insurance policy. But generally speaking, you can’t do the reverse.

How Does Your Age Play a Role in Your Premiums?

Does the cost of death insurance depend on your age? Well, premiums can vary a lot between age groups and insurance companies. Age is typically a primary determining factor in death insurance policy ​premiums.

Buying in early adulthood often results in the lowest premiums on death cover. Insurance companies consider these applicants healthy and with a lower risk of dying in the near term. Therefore, companies generally charge less for life insurance cover for those who are younger.

Later adulthood is when things change. Between the ages of 35 to 55, chances are you have extra financial obligations. This may also mean that you might choose to insure a larger sum to leave to your beneficiaries. Thus, the premiums often grow as insurance companies accommodate your growing needs.

Pre-retirement age is between 55 and 65 in Australia. It’s also the usual age at which many people consider buying life insurance. But starting at this later stage in life can seriously impact your premiums.

Starting your life insurance policy after the age of 65 is not always ideal. Premiums are generally the highest in this age group. That’s mostly because the remaining life expectancy of the policyholder is increasingly lower.

But that doesn’t mean that you can’t think of death cover later in life too. By this point, many people have some savings and fewer financial obligations. Therefore, you can reduce the overall cost of insurance by taking on a lower insured amount. Or maybe opting just for funeral expenses cover.

There are some essential things to consider when comparing ​life insurance rates​. Age does affect the premiums, more so as you get older. But there are other considerations to help you decide on a beneficial policy for you and your family.

It’s essential to analyse your finances. Know how much money you’ve saved already. Know how much debt you have. And how much your surviving family members would have in the event of your death. Perhaps they’ll need help with your children’s education expenses, for example.

These factors can help you determine what type of life insurance makes sense for you. Perhaps all you need to do is cover funeral expenses.

Death Insurance Can Help You Prepare for the Inevitable

Not everyone gets death insurance for the same reasons, or at the same age. But purchasing death insurance is one way to help provide for your loved ones, even after you pass.

And even though the idea of death cover seems simple enough, there’s a lot to learn before choosing a policy. From understanding how premiums work to reviewing different insurers, and other related issues.

Taking out life insurance may be one of the most important financial decisions you can make. To find out more or get a quote, call a NobleOak Life Australian-based insurance specialist on 1300 014 494 or go online for a no-obligation quote.

This is general information only and does not take into consideration your individual circumstances, objectives, financial situation, or needs.


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