Life insurance is a form of cover that you can take out to reduce the financial burden on your loved ones if you die or suffer a terminal illness. Even if you’re not the main provider of the household, or if you are comfortably retired, it’s not hard to imagine how your family could be affected financially if you were gone. On top of ongoing living expenses, your loved ones could be left with additional costs like organising your funeral, legal fees around your Will or estate, and making any changes to their living situation. Life insurance is designed to make this transition and loss a lot easier for the people you care about.
What is direct life insurance?
Direct life insurance is a type of life insurance that you can purchase on your own from the insurance company, without using a third-party agent or broker. For example – life insurance through your superannuation is not considered ‘direct’ as it is organised by your employer or union. If you see a life insurance ad online or on TV and decide to take out the policy, you have purchased direct life insurance.
When you hear or read something about life insurance in Australia, most of the time it is referring to direct life insurance.
One of the most important things to remember about direct life insurance is that you’ll need to do all of the research yourself when comparing policies. However, going direct also can give you more control over which insurer you go with. It may also be quicker and easier to get covered in some cases.
Is direct life insurance better for older Australians?
Everyone’s insurance needs are different, so it may be best to speak to a financial advisor if you’re unsure about which type of policy to go with. If you are comfortable doing your own research and reading the PDS of each policy to understand what it covers (and what’s excluded), you can usually take advantage of some great benefits and features offered by some providers. For example, Seniors Term Life Insurance lets you take out cover later in life without undergoing any blood tests or medicals when you apply.
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Different types of life insurance
Life insurance has several different types of policies. Some include:
- Term life insurance: covers you for a set number of years or until you reach a certain age (whichever comes first), so you can be covered for the period in life when you need it most.
- All of life insurance: this type of policy covers you for as long as you live or make a full payment claim (or until you decide to cancel).
- Group life insurance: this is a type of policy that you receive through your employer or superannuation fund. Keep in mind that group life insurance is not tailored to your specific needs or budget as your employer/super fund simply purchases a single contract which covers several people, being the funds members. This cover may expire when you reach a certain age or retire.
It’s important to remember that each of these types of policies have their own specific benefits, so you’ll need to factor that into your decision. For example, Seniors Term Life Insurance offers a triple payout for Accidental Death. This means that your family will have additional funds at a time when they are likely to have a lot of unexpected financial obligations.
What about funeral insurance?
Funeral insurance is a different type of insurance policy that is designed to cover the cost of a funeral or other final expenses and is generally guaranteed acceptance.
This works by paying out a smaller lump-sum benefit to your family when you die, helping them with the cost of your funeral. While this can be a great way to help your family with short-term expenses that come up when you pass away, it’s important to remember that funeral insurance only offers a limited cover amount and isn’t designed to cover long-term expenses such as living costs, rent/mortgage obligations, education, medical care, and so on.