Life Assurance 101

   08 Jan 2019

Understanding your options is vital to being able to make an informed decision about your life insurance cover.

Life Assurance is a protection policy that offers a lump sum of money to your dependents or beneficiaries in the case of your death. In most cases, you pay a monthly amount over a set length of time (hence why it is often called Term Assurance) and the insurance company will pay out to your family if you pass away during that time frame. This sum can be a real help to your family in managing with the sudden loss of your income, helping to pay for expenses, cover mortgage payments and other bills, or just giving your loved ones extra funds when they need it most.

Typically life insurance is chosen on the needs and goals of the policy owner. It is common to take out Life Assurance as part of a broader policy which provides other benefits such as Specified Illness Cover, which pays a lump sum in the case you find yourself dealing with a serious illness. Another option is Whole of Life assurance, which does as it says  on the tin, covering you for the entirety of your life, rather than the set term that is more common.

For most, Life Assurance offers a safety net and the peace of mind that your family will not struggle financially should you no longer be there for them. It can also be a way to help your loved ones meet financial goals, such as  paying off a mortgage or making sure that a business is financially secure, or seeing to it that your children have the funds to finish schooling. It’s important to note that Life Assurance pays out a one-time lump sum, rather than a monthly payment like a paycheck.

Term assurance is usually the most cost effective option for Life Assurance, with Specified Illness adding an amount to that if you choose to take that additional protection coverage. Whole of Life assurance is often the more expensive option.

Things that may affect the cost of your policy include:

  • Your current age
  • The type of work you engage in
  • The amount of cover you require
  • If you choose additional benefits, such as Specified Illness coverage
  • If you are a smoker or not
  • The length of coverage
  • Your current health
  • If you want the ability to extend coverage after the  policy ends. 

Many people wonder if they are eligible for Life Assurance due to health issues such as cancer, diabetes, heart attack or other serious health issues. In many cases you can still get Life Insurance, even with pre-existing medical conditions. This may cost a bit more, or the coverage might exclude certain conditions. Be sure to talk to your financial advisor to see what is possible.

How much coverage you should take out depends on your particular circumstances; for example how long before your dependants reach adulthood, the amount of debt you hold and the amount you are comfortable paying out each month. We offer a few tools to help you explore what might be right for you, such as our Life Assurance calculator and Quick Quote system to see what level of cover might be right for you, and how much that cover may cost.

There are a lot of options and variables in Life Assurance, so once you’ve taken the time to see what might be possible for you, we’re here to help you go through all the details and find the best policy for you and your family.