Personal risk insurance - Life insurance explained.
Insurance plays a vital role in protecting your financial wellbeing and providing peace of mind by helping you manage risks. There are different types of insurance to help manage different types of risk. The main types include general insurance which is used to protect things you own such as your home and your car, and personal risk insurance which covers things like life insurance and income protection insurance.
At Beyond Bank, we want to help our customers make informed decisions about personal risk insurance products.
This guide will help you understand life insurance.
Why is personal risk insurance important?
Personal risk insurance helps safeguard you and your family or dependents against financial loss that can be caused by death, disability and illness or injury.
There are four main types of personal risk insurance – Life insurance, income protection insurance, total and permanent disablement insurance and trauma insurance. They can be used separately to protect against specific risks and they can be used together to protect against a broad range of risks.
The different types of insurance are often bundled together. Personal risk insurance is an important part of building financial security and resilience.
| Type of insurance | How it works | What is might be used for |
| Life insurance | Pays a lump sum amount to the beneficiaries if the insured person dies | The lump sum amount might be used by beneficiaries to do things like pay off debt, pay school fees and education expenses and pay ongoing living expenses. |
| Income protection insurance | Pays a regular amount for a specified period of time to replace the income of the insured person if they can’t work due to illness or injury. | The insured person might use the regular payment to pay ongoing living expenses, make loan repayments and superannuation contributions. |
| Total and Permanent Disablement (TPD) insurance | Provides a lump sum payment if the insured person is totally and permanently disabled and unable to work. | The insured person might use the lump sum amount to do things like pay medical expenses, pay for modifications to their home, pay off debt, pay school fees and education expenses and pay ongoing living expenses. |
| Trauma insurance | Provides a lump sum payment if the insured person suffers a specific serious injury or illness. | The insured person might use the lump sum amount for things like medical expenses, make modifications to their home and pay ongoing living expenses. |
What is life insurance?
Life insurance provides a lump sum payment to the beneficiaries listed on the policy when the insured person dies. Often, the beneficiary of a life insurance policy will be the spouse or children of the insured person. If no beneficiaries nominated, the payment will go to the estate of the life insured. It is common for people to have life insurance within their superannuation fund, but it’s also possible to have separate or ‘stand-alone’ life insurance.
Why it's important.
Life insurance can be used to provide financial security for people like family members and other financial dependents. The payment received from a life insurance policy could be used for things like paying down mortgage debt, funding ongoing living expenses and paying for education of children.
Things to consider.
- Decide if you need life insurance. If you have a partner, children or other dependents, it can be a big help. If you don’t have any dependents, you may not need it.
- Check to see if you already have it. Some people will have life insurance provided by their superannuation fund. It’s easy to lose sight of this because the premiums are paid from your super balance and sometimes go unnoticed. Check using your super fund member login, your most recent statement or contact your super fund.
- Decide how much cover you need. To do this, consider things like how much money your dependents will need to cover things like the mortgage, credit card debts, personal loans, childcare costs, education costs and ongoing living expenses. Then consider how much money they will get from other sources and any cover you already have. The difference is a good indication of how much cover, or additional cover, you need. You can use the moneysmart Life Insurance calculator to get a good estimate of what you may need or talk to a financial adviser.
When comparing different policies have a look at things like benefits and features, exclusions, waiting periods, cover limits and the cost of premiums. There are different ways that premiums are calculated – stepped premiums that increase as you get older and level premiums that start out higher but don’t increase because you get older.
We’re here to help.
Figuring out whether you need personal risk insurance, what type you need and how much cover you need can be complex. If you need help understanding your options, contact your local branch, call us on 13 25 85 or visit our website and we’ll arrange a referral to a financial adviser from Bridges Financial Services. As a Beyond Bank customer, your first appointment is free.
