If you have a death cover policy, a lump sum amount of money will be paid out when you die. This money is paid to those that you nominate as your beneficiaries on the policy, often being your spouse, children and loved ones.
If you haven’t named a beneficiary on your policy, your estate decides where the money goes upon your death. You can read more about estate planning in our comprehensive guide.
Life cover may also include terminal illness cover, meaning a lump sum would be paid to you if you’re diagnosed with a terminal illness with limited life expectancy. Additionally, some providers allow you to add Total and Permanent Disability Insurance to the plan (usually at an additional premium).
Life Insurance Benefits
Along with a pay-out to your family upon death or a terminal illness diagnosis, life cover can also include many additional benefits depending on the policy and provider that you choose. These possible inclusions and benefits are explained below:
Advanced Payment Benefit
It can take a couple of months for a life insurance claim to be assessed, so the advanced payment benefit enables the insurer to pay-out a certain amount up front to your family when you die. A high amount for an advanced payment benefit is between $20,000 and $25,000, but the figure changes depending on your provider.
Regardless of the amount, the payment is designed to help your family meet immediate costs and expenses such as financial expenses and legal fees while the life insurance claim is being assessed.
Sometimes this payment is known as an advanced funeral payment or funeral cover, and if so, is a pay-out specifically designated to help your family cover funeral costs.
Repatriation Benefit
A repatriation benefit is when the life insurance policy provides financial assistance for the repatriation of the policyholder’s body if they pass away while traveling outside of their home country.
This is often an inclusion of comprehensive travel insurance policies, but having it included in your death cover means your family will have financial help in the event that you have not taken out travel insurance, or it’s not included.
Inflation or Indexation Benefit
Australians have become more and more aware of the effects of inflation in the past two years. Luckily, some life insurance providers offer a benefit that helps protect policyholders from the cost of living.
To do so, the sum insured is usually automatically increased on each policy anniversary in line with CPI. Some insurers have a maximum increase per year, such as 5%.
Financial Planning Benefit
A financial planning benefit inclusion within a life insurance policy provides the person insured or their immediate family member the costs associated with a financial advisor. There is usually a maximum amount per year or per consultation.
Grief Counselling Benefit
Your death or diagnosis with a terminal illness can be an emotional and overwhelming time for you and your loved ones, which is why many life insurance providers offer a grief counselling benefit. This is where professional grief counselling sessions are reimbursed, up to a certain number of sessions or total cost.
Future Insurability Benefit
The future insurability benefit allows the insured to increase their cover by a certain amount each year if they choose to (up to a certain amount, percent or age), usually without needing to provide any further evidence of health or insurability.
Premium Pause Benefit
Some providers offer their policyholders the option to pause their policy, usually for a maximum of up to 12 months. In doing so, policyholders will not be required to pay their premium in that time, and it will not be treated as a reinstatement or increase of cover once the premium pause period concludes.
Usually the insurance provider will only offer a pause once your cover has been in place for a certain number of years, and will not pay any claim arising from an event that occurs during the pause period and possibly not within a certain period of time of restarting your payments either.
Child’s Critical Illness Benefit
When given the option to add child’s critical illness to your life insurance policy, it means you can receive a benefit should your children suffer a critical illness. The insurance provider will specify which events classify as a critical illness, with the benefit paid to a certain amount and for children of a certain age.
Exclusions
What life insurance won’t cover is entirely dependent on the policy and provider that you choose. However, there are some general exclusions that are commonly found across the industry.
Most commonly is the exclusion of death by intentional or deliberate self-inflicted events–meaning suicide–for a certain amount of months after taking out the policy, or after any changes are made to the policy. Often, the period that suicide is excluded for is 13 months.
Depending on what your death cover includes, such as if it has Total and Permanent Disability Insurance or Trauma Benefits, there may be additional exclusions relating specifically to these.
There are also maximum age limits to keep in mind when looking for life insurance. This includes the maximum age that a provider will offer new coverage to, as well as the maximum age they will cover you until once you have taken out a policy.
Related: NobleOak Life Insurance Review