Life insurance pays a lump sum upon the death of the life insured. The primary purpose of life insurance is to ensure that your family is financially protected should you pass away. The lump sum from the policy is often used to:
- Pay off debts (mortgage, car, cards & business)
- Provide an income to cover everyday living expenses for surviving family members like groceries and utilities.
- Provide for the education of your children
Life insurance in Australia is also known as Term Life Insurance because the life insurance is offered for a fixed term, typically until the age of 99. The cost of Term Life cover increases as you get older, however the older and more established your financial position is, the less insurance you are likely to need. Therefore it’s possible to reduce your insurance over time to minimise cost but maintain protection for yourself and your loved ones.
While car and home insurance are relatively straightforward, life insurance can be complex, with many different options and levels of cover to choose from. We can help you decide which cover is right for you and what issues you need to consider. For example, which family members would you insure? When does it make sense to insure a non-working spouse? How should the benefits of any payment be distributed? What benefits are available within your superannuation scheme? What are the tax implications of taking out insurance?
David Kutcher Financial Planning can assist with you and your family’s life insurance requirements.
For a review of your life insurance requirements, please click here.
Total & Permanent Disability (TPD) Insurance
While life insurance pays a lump sum on death, Total & Permanent Disability (TPD) Insurance provides a lump sum in the event that the insured becomes totally or permanently disabled. TPD insurance is often combined with Term Life Insurance to cover situations of extreme injury which although does not result in death, leaves the insured in a state of permanent disablement. The differences between TPD and income protection insurance is that with income protection you do not have to be permanently disabled for the rest of your life in order to make a claim and it is paid on a monthly basis and not as a lump sum. The proceeds from a TPD policy are usually used to pay off debts, provide funds for ongoing medical expenses and nursing care and to make alterations to the family home to cater for a wheel chair etc.