22 April, 2015 - 10:27 AM GMT

How to choose between types of life insurance

Today’s life insurance products offer many more options beyond a simple benefit payout in the event of your death. It can be hard to choose, so it’s worthwhile to assess the different products on a basic level in terms of what they can offer you and your family.

Basic life cover will pay a lump sum to your beneficiaries if you die, and will usually allow you to access this sum early if you are diagnosed with a terminal illness. You can choose between whole-of-life cover, which covers you for an indefinite period, or term cover, which insures you for a set period, usually five, 10 or 20 years – this may be appropriate if your financial circumstances are changing for a set period, like if you are having children or your spouse is taking time out from the work force.

Total and permanent disablement insurance (TPD) will pay you a lump sum benefit if you become permanently injured and can no longer work. This type of insurance usually comes with different benefit options depending on the severity of your injury – for instance, if you can’t work in your chosen field but may be able to work in another one, or if you can no longer care for yourself at home.

TPD can be purchased on top of basic life cover or by itself.

Income protection insurance will pay you a regular income if you become seriously ill or injured and cannot work for a long stretch of time. This ensures the majority of your salary is replaced and you are still able to pay regular bills such as your mortgage.

Income protection is particularly important to consider if you have children or a spouse who depend on your income to pay these regular expenses.

Critical illness cover will pay a lump sum to cover your medical expenses while you are recovering from serious illnesses such as a stroke, heart attack or cancer.

Business expenses cover is a special type of insurance for business owners that ensures you are still able to cover the fixed costs of running your business if you become ill or injured. You can purchase this type of insurance if you are self-employed, or running a business with a partner or group of people.

As you can see, there are many different types of cover to choose from, and these are just the basics. For a more detailed explanation of what type and how much cover is right for you, it’s best to consult a financial adviser for a big-picture analysis of your needs.



This provides general information only, and is not intended as financial or other advice. AIA Australia Limited (ABN 79 004 837 861 AFSL 230043).