Looking for answers?
What is life cover?
Life cover, term insurance or death cover pays a lump sum of money when an insured life dies. The money pays to a nominated beneficiary or beneficiaries. If you haven’t named a beneficiary, either the superannuation trustee or the deceased’s estate will decide where the money gets paid to. Life cover may also include a ‘built in’ terminal illness component which will pay out a lump sum if the insured is diagnosed with a terminal illness which limits their life expectancy, usually between 12-24 months. Not to be confused with ‘Accidental’ death insurance which will only pay out if the insured dies from an accident, not from an illness or suicide. Generally Accidental death cover will have built in exclusions due to the lack of required medical disclosures at underwriting stage, or due to unfavourable health condition disclosures.
What is a beneficiary?
A beneficiary in the broadest sense is a natural person or other legal entity, ie a Trust designed to look after dependent relatives, who receives money or other benefits from a life insurance payout. For example, the beneficiary of a life insurance policy is the person who receives the payment of the amount of insurance after the death of the insured
Why do I need beneficiaries?
It’s important to name beneficiaries for a number of reasons. You are able to ‘control’ the flow of funds to where you rightfully feel they should be paid after your death. If you don’t name beneficiaries, your death benefit will go to your estate, legal proceedings could delay distributing the money, the cost of this could diminish the amount available and you run the risk of the proceeds not going to where you had intended them to go when you set up the insurance cover.
Do I need life cover?
If you have a partner or someone who relies on you financially, life cover can help pay debts left behind and to continue providing living expenses to your dependents when you die. If you don’t have debt or a partner, or people who depend on you financially, you may not need life cover. You would however consider getting other life insurance like Income Protection, Total & Permanent Disability or Trauma insurance to ease any debt obligations and living expenses in the event that you get sick or injured and aren’t in a position to continue earning an income in the short to long term.
I have a Superannuation fund; do I still need insurance?
If you are a member of an Australian superannuation fund you may already have some life and income protection insurance cover, though typically the default option may only provide a fraction of the cover you need. Australian superannuation plans also don’t generally include serious or trauma illness insurance cover. To work out if you need to consider extra cover, check the insurance you have through your superannuation fund or employer and use the Australian Government's Moneysmart online calculator.
I do not have any debt, do I still need cover?
If you don’t have debt or people who depend on you financially, you may not need life cover. You would however consider getting other life insurance like Income Protection, Total & Permanent Disability or Trauma insurance to ease or replace your living expenses in the event that you get sick or injured and aren’t in a position to continue earning an income in the short to long term.
How much cover do I need?
Finding the right level of cover for you depends on your own individual circumstances. Things to consider is your stage of life, who is financially dependent on you, your levels of debt and the ongoing living expenses you need to take care of yourself and your family. An online calculator like this one from Moneysmart.gov.au may be helpful when considering the right levels of cover for your circumstances. Alternatively, contact a licensed financial planner for professional advice. For Income Protection insurance, the level of cover available is generally limited to 75% of the income you generate through work.
What is income protection (IP) insurance and what does it cover?
Income protection insurance pays up to 70% of your pre-tax, earned income for a specified time if you're unable to work due to illness or an injury, either partially or totally disability, temporarily or permanently.
Each IP policy has its own definition of partial or total disability that must be met before a claim is made. Check your insurer's website or the product disclosure statement (PDS) for the definition and for any exclusions that apply to the contract and to your specific circumstances.
Your IP policy will have a waiting period before payments start due to the loss of your income through injury or illness, there will also be a benefit period that the claim period will run for while you are unable to work, periods vary from 2 to 5 years, or until the age of 65 or 70 are common. It’s important to note that IP insurance doesn't cover you for lost income because you are stood down or become unemployed, the main aim of IP cover is to ensure that if you have an illness or an injury that prevents you from working, your Income Protection insurance provides you with a safety net of payments while you recover to protect your family income and assets.
Do I need income protection insurance?
Income protection insurance can be important if you:
- are self-employed or a small business owner, as you may not have sick or annual leave
- have family members or dependents that rely on the income you earn
- have debt, such as a mortgage, you'll need to make payments on even if you're unable to work
To work out how much income protection you need, prepare a budget. This will help you see your monthly expenses and the income you'll need to replace. You may want to factor in making payments to your super as well.
Also consider:
- if you have total or permanent disability
- or trauma insurance, that can help replace lost income
- if you have private health insurance that could help pay for any medical expenses
- what help or support from family or friends may be available
Is Workers Compensation the same as Income Protection cover?
Workers’ Compensation will only cover you if your injury happens in the workplace or your sickness can be directly linked to your employment.
Why do my premiums go up every year?
Where your premium type is ‘stepped’, your premiums go up each year based on your changing benefit amount and your increase in age. Where your premium type is ‘level’, your premiums go up each year based on your changing benefit amount but not your increase in age. Some insurers offer a ‘hybrid’ type premium, for the first few years your premium type may start as a stepped or level type, and after a few years the premium type convert to a stepped or a level premium pattern.
Premium rates and the policy fee are generally not guaranteed by life insurers, these are reviewed annual and can move up or down in the future, regardless of which premium type you select.
Additionally, some products have an inbuilt Indexation Benefit. On each policy anniversary, the cover amount will increase in line with the consumer price index (CPI). Your premium will also be increased at the same time to reflect the increased cover amount.
What is Stepped and Level Premium and what is the difference between the two?
You can generally choose to pay for income protection insurance with either:
- Stepped premiums — generally charged lower than ‘Level’ premiums, the premium you pay is recalculated at each policy renewal, usually increasing based on your age. The premise being, the older you get, the higher chance of a claim
- Level premiums — generally charged a higher premium at the start of the policy, but changes to annual cost aren't based on your age, so the increases happen more slowly over time and generally increase due to your cover increases. Level premiums aren’t guaranteed to remain constant, even without cover increases.
The choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.
Are my premiums guaranteed?
For most Australian policies, premium rates are not guaranteed and may change from time to time. Once your insurance cover is in place, any change to premium rates will apply to a group of people (eg 32 year old male, non-smoker) rather than to individuals, regardless of any changes to your health, occupation or pastimes. Generally, rates will increase at your policy anniversary and the insurer will write to you at least 30 before any changes in premiums take effect.
I have an insurance policy already but have recently been diagnosed with a medical condition. Do I have to tell my insurer? Will they cancel my policy or increase my premiums?
No. Underwritten life Insurance policies are 'guaranteed renewable'. This means that provided you met your duty of disclosure at the beginning of the policy and continue to pay your premiums, an insurer cannot cancel your policy or increase your premiums due to any new medical conditions you develop after you take out the policy. This is why it makes sense to take out all types of life insurance when you are still young and healthy and to retain any life insurance you have if your health has declined.
What is TPD Insurance?
Find out about TPD Insurance HERE.
What is Trauma Insurance?
Find out about Trauma Insurance HERE.
I can’t afford my insurance premium, what are my options?
Options to reduce premiums could include reducing the amount of cover you have. Cancelling a benefit, increasing the ‘waiting period’ or reducing the ‘benefit period’ on an income protection or business expense policy. It is best to seek advice from a licensed financial planner if you need affordability options. Find out more about Insurance Premiums here.
What happens if I don’t pay my life insurance premium?
If you don’t pay your insurance premiums, your policy will lapse and you will no longer be covered under your policy and you’ll be ineligible to claim. Generally, life insurers will grant a 30-60 day ‘grace’ period in which to back pay premiums. Some insurers will offer a ‘waiver’ of a premium depending on your personal circumstances, it is always in your interest to call your insurer as soon as you have missed a premium or are having difficulties paying your premium to see how they can assist. Always check your insurance PDS for terms and conditions applicable to your policy.
Am I covered if I travel overseas?
Yes. Once your application is accepted, you are covered 24/7, anywhere in the world. But life insurance does NOT replace travel insurance
Are my premiums Tax Deductible?
If you hold personally owned Life, TPD or Trauma Cover outside of superannuation, premiums are generally not tax-deductible, and benefits are generally tax free. If you hold Income Protection Cover or Business Expense Cover outside of superannuation, premiums are generally tax-deductible, and benefits are generally treated as assessable income. Your individual circumstances can be quite different, so we always recommend speaking with an independent tax expert regarding your own situation to determine if your premiums are tax deductible.
Do I have to wait for my policy anniversary to increase or decrease my cover or premium?
No, you can generally increase or decrease your cover or premium without waiting for your policy anniversary.
What do I do if I need to make a claim?
To make a claim on your insurance policy, call us, NOR Financial on 1300 11 33 50 or call your Insurer directly. Ask how the claim process works and for the forms required to initiate a claim. Make sure you have your policy number available and ask for help if you are feeling overwhelmed during the claim process.
What information will I need to make a claim?
Depending on your claim, each insurer will differ slightly in their process. All insurers will require completed claim forms detailing the claim event. If the claim is for Income Protection, they may require medical reports and results from the treating doctor, supporting payslips or financials, details of your work duties, including physical requirements and the number of hours you work each week. If someone has died, the insurer will require a death certificate and in some cases doctors' reports. It's important to note that requirements for each type of benefit and each insurer will differ. However, your financial planner and the insurer will be there to help you through the process.
Does my life insurance contract include COVID-19 cover?
Unless there is a specific COVID-19 or pandemic exclusion on your policy, the way your retail insurance policy is assessed at claim time shouldn’t be affected by the COVID-19 virus.
Where do I go if I need financial advice?
NOR Financial is a licensed financial services provider under Dirigere Advisory, AFS License No. 524371. We are here to assist with any advice and changes you would like to make to your policy, any questions you may have. If you require financial advice in an area we dont understand well, we can put you in touch with a licensed financial adviser to suit your needs.
Who do I contact to make changes on my policy?
You may contact your provider directly using their contact details avaiable in the resources tab. NOR Financial are also here to assist our existing clients with any changes they would like to make. You can contact us directly at NOR Financial on 1300 11 33 50 or email us on admin@norfinancial.com