Before you choose a life insurance policy, take some time to think about what your needs really are. The whole point of life insurance is to provide your beneficiaries with enough money to pay off your financial liabilities in the event of your death. You may also decide to add an extra amount to cover any other financial needs your family has until they’re able to live independently again.

In other cases, you may want to ensure there’s enough in the insurance payout figure to be invested in some form of income-generating investment plan. This can help to provide a level of supplementary income for your beneficiaries after you’re gone.

New or Existing Policy

Many insurance companies will allow you to set up a new life insurance policy with them to help provide the level of cover you want. However, did you know you already have coverage for ‘death and disability’ as part of your superannuation account?

You may find the benefit amount shown on your super statements isn’t high enough to cover your outstanding debts and provide your family with a little extra financial back-up. In this case, you’re able to purchase more.

It’s usually much cheaper to purchase more coverage through your existing super account than it is to buy a whole new policy through a different insurer. However, it’s always worth comparing and double-checking what is contained in each policy.

Indexed to CPI

You may also need to check that your policy is indexed to inflation. This will help you to ensure whether your current level of cover will keep up with the cost of living over a period of time.

A policy that isn’t indexed to CPI may begin to fall behind over the term of the policy, leaving your beneficiaries with less than you intended. Sure, this might be an amount that may have looked large at the beginning of the policy, but after 30 years, will that same amount of money still be worth the same?

Compare Premiums

When you’re checking out your life insurance policy options, always check the premiums payable. Insurance is extremely competitive, so you should find that shopping around and negotiating for a good deal can help keep your costs down.

Clearly Understood Policies

Never sign up for a life insurance policy you don’t completely understand. If you’re unsure of any terms or inclusions in your policy, ask your advisor plenty of questions. If you’re not receiving clear answers, or if your advisor skirts around the answers, find someone else to help you instead.

Additional Inclusions

Life insurance is usually a death cover, paying out a lump sum of money on your death, or upon receiving news of a terminal illness. However, you are also able to include coverage for Total and Permanent Disability. If you’re suddenly unable to work in any occupation again as a result of accident or illness, you could receive a lump sum payment to compensate for this.

Once again, you may find that you have a level of TPD coverage attached to your current superannuation account. If this policy is acceptable to you, you may be able to increase the payout amount by paying a little extra into this account rather than buying a new policy.

Check that the policy does include Accident and Sickness. This helps to protect you against more potential events.

However, always compare other policies to your super account before simply accepting this option. This will ensure you have the right type of cover to suit your needs.

Income Protection Insurance

There may be instances where you are unable to work for a temporary length of time. Your Life Insurance policy won’t pay out and your Total and Permanent Disability cover doesn’t count in this case.

This is where Income Protection Insurance can be very handy. It will cover your income in the event of accident, illness or injury where you’re unable to work for a period of time.

Many policies will include a waiting period, so double check how long you will need to wait before your payments will start in the event of a claim. Longer waiting periods mean lower premium payments. However, you will need to be sure you can survive financially until those payments do begin.