How does life insurance work in Australia and how do I get started?

Life insurance, also known as life cover, death cover or term life insurance, is a contract between an individual and a life insurance company. In exchange for regular premium payments, the insurer agrees to provide a lump sum payment to your beneficiaries when you pass away. This payment, known as a death benefit, can help your loved ones maintain their financial stability during a time of need, if the worst was to happen.

There are typically other features which may be available to your loved ones under your policy if you were to pass away, such as an advance on your cover to assist with your funeral or grief counselling. For example, with NobleOak’s Life Insurance product your loved ones would receive $15,000 of your life cover amount to assist with funeral expenses.

There are several questions to answer before deciding on the best life insurance policy for you.  

Do you want to purchase direct life insurance or do you want to go through an adviser?

You can purchase a policy through a financial adviser, financial planner or broker who can guide you through the process of purchasing life insurance, including the different types of cover available, and the level of cover that is right for you.

Alternatively, you can purchase a policy from a direct life insurer, without needing to go through a financial adviser or insurance broker. NobleOak is a direct life insurer.

While financial advice is included in the services provided by an adviser or financial planner, you might want to consider that this advice typically comes with the extra cost of fees and commissions paid by the insurer to the adviser, which may then be factored into the premiums you pay.

With a direct life insurer such as NobleOak, you have the opportunity to deal directly without any extra fees.

How much life insurance cover do you need?

Of course, you cannot exactly predict how much life insurance you might need. But you can narrow the figure down by looking at your objectives, financial situation (such as current assets and debts) and needs.

Here are some considerations when it comes to planning your life insurance.

• What are your family’s regular living costs? Do you have any plans to reduce or expand them in the future?
• Do you have personal savings? What assets do you have available?
• What is the balance of your loans and credit cards? Do you have a mortgage and how much do you owe on it? Do you have other debts and how long would it take to pay them off?
• What would your family’s income look like after your death? Are there other sources of income they could count on?

Once you answer these questions as accurately as you can, you will have a clearer picture on what is right for you.

Other factors you may want to take into consideration are your life circumstances. For example, if you have small children or are planning to have kids in the future, you may wish to include the costs for their education. You could also consider a retirement fund for your partner.

Do you want fully or partially underwritten cover?

Some direct life insurers, including NobleOak, offer fully underwritten cover. This means a number of health, occupation and lifestyle questions are asked upfront and sometimes requires medical tests and access to your medical records. This results in greater certainty for the insurer about the risks that will be taken to insure you and a greater level of certainty for you at claims time.

Some other direct life insurers only offer partially underwritten cover, in which your individual circumstances and risk factors are not factored in. This may increase uncertainty during claim time.

How should you compare life insurance providers if you decide to buy direct life insurance?

You should research and compare insurance providers to find the right coverage for our objectives, financial situation and needs. Canstar and Finder are two examples of websites that can help you to do this, as they evaluate insurers based on reputation, financial stability, customer feedback and policy terms.

It is a good idea to obtain quotes from multiple providers to ensure cost-effectiveness and ensure that you are choosing the right product features for you. Once you have decided which provider you want to move ahead with, you can either start your application online or speak to their customer service team.

To learn more about choosing the right provider for you and how to compare life insurance in Australia, you can visit here.