Guide in Choosing Term Life Insurance

Article by Laureen Cownie

Are you confused as to which type of insurance you are going to choose? There are good insurers in Australia to choose from. The following are some guidelines to help you determine the best type for you, and the best term insurance rate that suits your budget.

What Do We Mean by Term Life Insurance?

It is a type of insurance wherein a person is insured within a specific period of time or “term”; say, ranging from ten up to thirty or forty years, with a specified monthly, quarterly, or yearly premium. The company will pay the agreed lump sum amount in the event of the insured’s death or terminal illness [i.e. an illness from which you are expected to die within 12 months, according to a medical practitioner], thereby allowing for an advanced payment). This type of policy usually has an exclusion for if death is due to suicide in the first 13 months. Term and Whole are the two basic options in choosing life insurance. It is important to fully understand each type of insurance before making your decision.

On one hand, term generally has cheaper rates as compared to whole. This allows the insured person to purchase more insurance for less money and frees up room in his/her budget for other things.

The rate should stay the same the entire length of the term, but once the term ends, the insurance also expires. This makes its rate lower compared to lifetime insurance. Technically, the insured person does not take the money at the end of the term policy. The only way for the company to pay out is when the insured passes away.

On the other hand, whole life insurance lasts for a lifetime provided that the insured continually makes the payments on the policy. This type usually provides an option for the insured to cash out the policy and the money he/she has paid for anytime during the insured’s lifetime. In such a case, it will cancel the policy, but may provide financial assistance as needed. Its cost is much higher, and the rates of return are usually much lower than normal investments.

Term life insurance is generally the best type of life insurance to purchase. Considering its lower cost , this allows the insured person to pay off his current debts and still have enough left for the spouse and children to survive over the years. While the cost of a whole life insurance is higher, its return money, however, is lower as compared when the same amount is invested to a mutual fund.

Although term insurance looks simple enough, here are some advice to help you save money and get the best term life insurance rate:

1. Find a guaranteed renewable term insurance policy. For example, you purchase a 10-year term life insurance policy. After the 10 years are up, you want to make sure you can renew that policy for as long as you want, regardless of your health.

2. Ensure that you get a fixed premium term insurance policy. Most term insurance premiums are fixed, but some term insurance companies may offer a fixed premium for the first few years but then the premium may increase. If the premium seems drastically lower than those found at other companies, ask them if the premium is fixed for the life of the term. Always ask for an insurance quote.

3. Do a lot of research before you choose a company. Term life insurance can be search online. Premium prices and the term of the policy can vary dramatically. Look for an insurer that is willing to provide you a quote first before they must meet with you. Getting a term insurance quote online is a quick and easy way to compare company prices in the privacy of your home and since you will be able to compare many different companies, you will be able to choose the term insurance rate that best suits your budget.

This serves only as your guide. You can start making inquiries about life insurance in Australia. Hope this simple guide helps you.

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