How to choose life insurance optional benefits

While commonly available as optional benefits under a life insurance policy, you can also take out the following types of cover as standalone policies, depending on the insurer. We all live busy lives — working, looking after our families, studying, furthering our careers, and exploring the world. With so much happening at every moment, it’s easy to forget about the unpredictability of life.

So how does life insurance play a part?

Well, it’s important to be realistic. No matter what age you are and what you do, there’s always a risk that things may not go completely to plan — with the potential for illness, disability, accidents, and even death.

And while no one wants to ever think about such things, let alone go through them, these things can happen. Sadly 5,963 Australians aged 20 to 44 died prematurely in 2017. While we can’t predict the future, life insurance can help provide peace of mind and financially protect both you and those who matter most to you, should anything like this ever happen.

But how do you know what you actually need? What life insurance optional benefits could be relevant to your own circumstances?

Getting the right optional benefits for your needs

You may be surprised by how many life insurers offer vastly different policies, each with their own optional benefits.

Don’t worry — it’s not just you! ASIC’s recent report shows that many people are being sold life insurance that they either don’t want, can’t afford or doesn’t meet their expectations.

Of all policies taken out, one in five were cancelled within the cooling-off period, with a substantial amount more being cancelled within the first three years. This shows how important it is to choose the right policy with appropriate optional benefits that align with your needs and circumstances.

To help, it pays to know which optional benefits can enhance your policy — which is why we’ve compiled this information.

What are common life insurance optional benefits?

While commonly available as optional benefits under a life insurance policy, you can also take out the following types of cover as standalone policies, depending on the insurer.

Total and Permanent Disability (TPD) insurance

Total and Permanent Disability (or TPD) insurance provides a lump sum payment should you get injured or sick and become permanently disabled as a result of a specified event. This isn’t just to compensate for the financial needs, but also the potential loss of income.

As an example: Alice is 40, married and has three children. She and her husband own their home, but they currently have an outstanding mortgage balance of $250,000 on an investment property.

Alice works full-time and earns a good income. She decides she wants peace of mind knowing that if she ever became severely disabled and unable to work, she and her husband could pay off the investment loan in full and cover any medical fees.

Serious illness insurance

Serious illness insurance provides cover if you’re diagnosed with a specified illness or injury, such as a heart attack, malignant cancer, stroke or coronary artery bypass surgery, which affects your income-earning ability while recovering.

Should this ever happen, serious illness insurance can help provide financial support for you and your family while you focus on getting better.

Children's insurance

Some life insurance policies extend to your children too, where a lump sum payment is made if they ever suffer from serious illnesses such paralysis, meningitis, get diagnosed with a terminal illness or even accidental death.

There’s nothing more concerning for a parent than their children, especially when they’re sick. Chances are, you’d sacrifice your income and put your career on hold while you tend to them, and this can put a bit of a strain on the finances.

Children’s insurance can help ease this burden should you need to take unpaid leave, allowing you to have money for medical bills and other expenses.

Policies, terms, conditions, and exclusions do vary between insurance providers, so it’s important that you read and compare the Product Disclosure Statements (PDS) before making a decision.

Optional benefits at every life stage

Who wants to think about the future when there’s so much going on right now? Rather than putting it off, here’s some information on how optional benefits may help wherever you are in life.

Young and single

While you’re young, single and carefree, you’re probably wondering why you would even need life insurance, let alone TDP or serious illness insurance. However, you have years of adventuring ahead of you and you never know what life has in store.

You may feel invincible in your late teens and 20s, but sadly, injury is the leading cause of death for younger people.

If anything were to happen, life insurance could help maintain your independence and quality of life, without you having to struggle with your current financial obligations like university debt and car loans — or having to move back in with your parents.

As an added benefit, insurance premiums are generally cheaper when you are younger because the likelihood of a claim is lower. So, at this age, having sufficient insurance and extras means you’ll be covered, without it costing an arm and a leg!

Young couples

During this stage, you may find yourself a partner, settle down and share joint assets (yikes!). While it’s all very exciting, building a life together with someone may be a good reason to consider life insurance optional benefits, because you’re more likely to share debts, and therefore the shared risk of not being able to maintain these should the worst happen. Life insurance, especially at these earlier stages, can help protect what you’re building together.

As far as options go for young couples, just like a young single person, your premiums will generally be lower and more cover options will be available.

If you already have life insurance and you want to enhance it with optional benefits, or you’re getting life insurance for the first time, you may want to consider serious illness insurance and TPD to protect each other and your shared lives. This can give you peace of mind by helping lessen some of the financial burden if one of you were to ever get seriously ill, or become permanently disabled and unable to work.

Young families

Families come in all shapes and sizes, and it’s important to protect each other from potential risks. Whether you’re thinking about kids and all of those adult expenses like a house, car, education, childcare and so on, living costs will begin to increase.

Life insurance optional benefits that include children’s insurance, TPD and serious illness insurance may provide added peace of mind. This way, if one of you or your kids were to get sick and you needed to take time off to be a full or part-time carer, you can rest easier knowing that your family has a plan to help manage expenses like the mortgage and everyday bills. After all, no one wants to be forced to work for an income while their kids need TLC.

Maturing families

As your kids start to get older (along with the parents), your family is well-established and you're probably paying off your house and thinking about your super.

Even after all that life experience, you can’t predict what life still has in store for you, and life insurance may be the safety net you need.

Most of us don’t expect our kids to still be living at home into their 20s and 30s. Even if they’re paying you rent, having to financially support your adult kids can still place a big strain on your finances, especially if you’re looking for a better work-life balance and wanting to cut back on your work hours over the next few years.

If you find your family in this increasingly common situation, then extra cover might be something worth considering to keep your family safe from unexpected challenges, such as serious injury. Optional benefits such as TPD, and serious illness protection can help keep the entire clan protected, if the family member/s supporting the family with their personal income are suddenly not able to work.

Empty nesters

Your kids have moved out and now you’ve got the complete freedom to get out, see the world and do the things an independent adult has always dreamed of!

Of course, you’re not as agile as you were in your youth, and while travelling around, you don’t want accidents or injuries to stop you from living the life you deserve.

Life insurance can help ensure you’re financially protected against risks with optional benefits, such as serious illness and TPD. This way, you know you can enjoy greater freedom without worrying about anything slowing you down.

Is life insurance right for you?

When considering life insurance, weigh up the emotional benefits it offers you and your family (such as helping to alleviate money concerns, providing peace of mind, or less stress in case something happens) just as much as the practical and monetary side too.

Everyone’s situation is different. Your needs are specific and you need the right life insurance policy to match it. It’s all about finding a policy that aligns with your circumstances.

Comparing a range of life insurance policies to see what’s available out there can be really helpful to ensure you find one that best matches your needs. Choosi can help you compare products by providing you with quotes from different life insurers, and help you apply for cover. Not only does Choosi do the hard work for you, you won’t pay extra when you purchase a policy through us! It’s simple, fast and free to compare – try it now!

This isn’t a complete guide to all optional benefits that may be available in the market. You should consider the wider market before making a decision as to what’s right for you. This is general advice only and doesn’t consider you personal needs or circumstances.