Understanding the Different Types of Life Insurance Policies Out There

Understanding the Different Types of Life Insurance Policies Out There
September 01 10:55 2018 Print This Article

In the event of your untimely demise, you will almost certainly need life insurance coverage so as to be able to protect the financial interests of your loved ones or even any organizations that may well have been relying on your income for their sustenance. Indeed, it is precisely for this reason alone that it is very important for you to be able to understand the basics of life insurance as well as to familiarize yourself and your loved ones too. Especially with regard to the many life insurance options that are currently available in Australia today.

Broadly defined, there are basically two main types of life insurance around and both of them have entirely different policies and procedures with several unique features to be able to appeal to different individuals from all walks of life.

  • Term life insurance


Term life insurance is by and large, considered to be the (by now ubiquitous) standard insurance policy that essentially provides broad coverage for a very specific period of time. What this means is that should the policy holder pass away, within that specific term, then the beneficiary (or beneficiaries as the case may be) that you have mentioned in the form will not be entitled to the (death) benefits, once the policy has expired.

As a matter of fact, it is considered expedient to basically select the particular term that works best for you (in consultation with your loved ones of course), along with the common lengths for a typical term life insurance policy. These generally include 10, 20, or 30 year time spans.

However, one of the single biggest challenges for people who tend to purchase term life insurance is centered around taking a decision on exactly how long the policy should really last. Some people opt for policies till retirement age or till their youngest dependents will be requiring their financial support.

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  • Permanent life insurance

Permanent life insurance as the very term implies, essentially provides lifelong coverage for the policy holders as long as they basically continue to pay their premiums. But a point to be noted here is that the overall premium (the amount you have to pay per annum to keep the policy alive) for permanent life insurance is usually considerably more expensive than its term life counterpart, but on the other hand, it generally does not increase as you tend to age.

In this case, permanent life insurance is also widely known as a sort of ‘cash value’ insurance option and is often considered to be a totally sound financial investment, as well. This is due to the fact that part of the premiums that the policy holder pays, are also directly invested by the company that had sold him or her the policy, in the first place. Just visit https://www.freedominsurance.com.au/products/life-insurance/ to help ascertain exactly which insurance policy is just right for you.

However, it is pertinent to note that permanent life insurance policies tend to have two different values, a face value and a cash value. The face value would be the full amount that the beneficiaries will receive on the demise of the policy holder. The cash value on the other hand, is actually equal to the total amount of premiums that have been paid, plus any and all investment earnings stemming from the policy. And it is entirely up to you to decide which one suits you the best.

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