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How to compare life insurance

How to compare life insurance

If you’ve decided to jump on board and are considering taking out life insurance, your first step could be to compare the policy options available to you. There are a few different ways you can do this, and you’ll need to make some important decisions before you start shopping around for life insurance.

When could be the right time to get life insurance

The best time to get a life insurance policy will be different for each person so there’s no blanket-rule that applies to everyone. Life insurance is ultimately about protecting your personal circumstances, so you’ll need to consider your specific financial needs to decide whether it’s right for you. You’ll also usually have to be at least 18 years old to apply for a direct policy in Australia.

When considering life insurance and comparing product cover, the younger applicant may have a higher rate of acceptance due to good health. Because as you age and experience health issues, the likelihood increases that your insurer may apply a loading or special exclusion to your policy, or you may even find that some insurers will decline to offer you cover.

Premium values for the same coverage may also vary with each insurance company due to their claims rates and running costs. Comparing the benefits, features and cover details may further assist in decision-making.

Many people consider taking out life insurance after major life events such as when they get married or have kids, but it could be worth looking into getting life insurance at any time depending on your situation.

What to consider when comparing a life insurance quote?

Comparing life insurance quotes can be tricky because every policy is different. This means that simply looking at basic features and costs won’t always give you the full story as some policies may have specific inclusions or extra features (or even exclusions) that could be important to you. The real value of a policy will depend on these, so speaking to a financial advisor, broker, or an insurance specialist may also be helpful.

If you’d like to DIY, you can get an individual life insurance quote from different providers and then compare them. This will likely take time and require some impressive organisation skills, but the upside is that you’ll be able to compare the exact policies you want at your own pace.

Alternatively, you can let a comparison service provider such as Choosi do the legwork for you by comparing quotes from a range of life insurance brands. By asking you a few basic questions, like your gender, age, smoking status, and how much cover you want, Choosi will shortlist relevant policies from their range of insurance brands that match your selected requirements, making it easy to understand your options and the features of each policy beyond the price. Choosi can also discuss the different features and benefits of each policy, so you can choose the one that suits your needs.

Once you’ve chosen a policy, you can then apply for it directly, and pay the same price for it as you would if you went direct to the insurer, thanks to the Choosi Price Guarantee (terms and conditions apply).

Before getting quotes, it’s important to consider the following points.

Your life stage

Life is a unique journey for everyone so make sure your life insurance policy reflects where you’re up to. Keep in mind that life insurance is not a one-size-fits-all product, but rather a personalised one that needs to cover your risks and concerns, relating to your family and loved ones. That means you need to consider what life stage you’re currently at.

  • Young singles – if you have accumulated some debts like a car loan, mortgage or credit card balance, then life insurance could help pay these out if you passed away. Read more about life insurance for young singles.
  • Young couples – wedding, joint assets and kids: if these are on the horizon for you, it might be time to consider looking into life insurance as part of your family plan. Read more about life insurance for young couples.
  • Young families – every family is different, but one thing that unites all parents is the desire to do the best for their kids. Life insurance could help give your family financial security in the event of your death. Read more about life insurance for young families.
  • Maturing families – consider protecting the lifestyle you’ve worked hard to create for your family, even as your kids get older and start to move out. Read more about life insurance for maturing families.
  • Empty nesters – your final working years are essential to setting up a comfortable retirement. Life insurance could have you covered if things were to go awry. Read more about life insurance for empty nesters.

Also, keep in mind that your needs will most likely change over time as you move into different stages of life, so try to factor this in when reviewing life insurance quotes and requirements. You may find yourself moving through some of these faster than expected!

Setting the right level of cover

The cost of your life insurance will depend in part on the amount of cover you apply for (in addition to other factors such as your age at application and health and lifestyle), so it’s good to take the time to get this right. It’s important to consider what’s appropriate for your situation so that you’re covered for exactly what you need, and to not be over or underinsured. Underinsurance is a growing problem among Australians, but overinsuring could also mean that you’re paying for cover you may not necessarily need.

When determining how much life insurance cover you need, it’s worth considering:

  • Your existing debts: would you want all your existing debts like personal loans, credit cards, and your mortgage to be paid off so that your family can live debt-free?
  • Your existing living expenses and standard of living: would you want to maintain your family’s existing lifestyle, or would they need to downgrade and lower their expenses (e.g. private school vs. public school)?
  • Your partner’s ability to earn an income: does your partner earn an income? The amount you apply for could need to take into account whether your partner can bring in an income when yours no longer exists, or if their existing income will need to be supplemented by your life insurance payout.
  • The age of your kids: are your kids still young and therefore need financial support or are they a bit older (e.g. teenagers or young adults)? How many years would they need financial support for before they’re able to support themselves?
  • Your super balance: it’s a good idea to know how much you’ve accumulated in your account as that may reduce the life insurance cover amount you might need. It may also be good to check if you have any life insurance cover within your super. You may already be part of a group policy with your employer, so check what’s covered and what’s not and whether this will be enough to cover your needs.
  • Your existing savings and/or investment income, or paid leave balance: if your family is entitled to receive money from these, then it may reduce the life insurance cover amount you might need.

You can also check the Moneysmart calculator to assist you.

Price vs. value

If you’d like to start comparing life insurance policies by price shopping, then make sure you’re not overlooking important advantages that some policies may have over others. For example, one policy may have more exclusions, but if it covers a specific event that you’re concerned about, then it could be more suitable for you.

The quote you receive for life insurance will generally be based on:

  • The benefit amount (cover amount) you apply for;
  • Your age;
  • Your gender;
  • Your smoking status;
  • Your lifestyle; and
  • Your family’s and your medical history.

You can always request life insurance quotes from a range of brands with Choosi today.

Type of cover

Life insurance is usually sold under a few different types of cover. Some of these can be combined into a single policy or even purchased individually depending on what exactly you need.

  • Standard life insurance (also known as death or life cover) covers you for death or a terminal illness diagnosis.
  • Income protection insurance covers up to (generally) 75% of your pre-tax income which can help you keep up with ongoing expenses if you’re unable to work for a specified period of time due to injury or illness.
  • Total and permanent disability insurance (also known as permanently unable to work insurance) covers you for a total and permanent disability that prevents you from living independently and/or working in either your job or any job.
  • Serious illness insurance (also known as trauma insurance) covers you for specified illnesses such as cancer or heart disease.

This information is general only; doesn’t take into account your personal objectives, financial situation or needs; and shouldn’t be relied upon as advice. You should consider the relevant Product Disclosure Statement (PDS) for more information and to ensure the product suits your needs. If you have legal, tax, or financial questions, you should consult an appropriate professional.

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