Life insurance works similarly to the manner in which you insure your home or car. The only major difference is that it protects your greatest asset, which is yourself.
How does Life Insurance do this?
Being the stakeholder involved, you are bound to pay your insurance company or provider a yearly or monthly premium. Then in the event of any unfortunate situation, your insurance company is liable to pay you out.
What are the different types of coverage involved?
There are four important subsets of life insurance. They include- Term Life Insurance, Income Protection Insurance, Total and Permanent Disability Insurance and Trauma Insurance. All these types work to provide you with a monthly amount or a lump sum in the event of any accident, illness or death. The type of coverage involved depends entirely on the type of life insurance you make use of.
What amount of premium do I pay?
Your premium amount does not solely depend upon one thing in particular. There are a number of factors to take into consideration. It includes your type of coverage, the place you purchased it from and the type of risk you are perceived to be by your insurance provider.
The good news for Australians is that most premiums in general are considered as affordable to the majority as a whole. To help you get an idea regarding premium amounts, we’ve set up two common examples.
1. A 35 year old male, who is a non-smoker has applied for Life Insurance cover worth $500,000. He is liable to pay a premium of approximately $30 a month.
2. A 35 year old female, who is a non-smoker has applied for Life Insurance cover worth $500,000. She is liable to pay a premium of approximately $25 a month.
Note: You can pay your premium on a monthly, quarterly, half yearly or yearly basis, depending on the flexibility of your budget.
What does a company assessing my risk mean?
Most insurance companies are subjected to associate a level of risk to their clients. This risk varies from individual to individual. Many insurance companies ask their customers a set of basic questions to assess your risk, whenever you apply for insurance.
An example of someone who is perceived to be at a low risk includes a young, healthy individual working at a low risk occupation. On the other hand, someone who is older, unhealthy, a smoker and works at a high risk occupation site such as a miner is bound to be at a higher risk level.
Do all insurance companies always assess risk?
No, not all insurance companies assess risk, otherwise known as underwriting. Those individuals who have access to their insurance via their employer for example, may not be assessed for their relative level of risk.