Life Insurance with Money Matchmaker®

Choosing a Life Insurance Policy

Written by

Shaun McGowan

Before you apply for life insurance

Use the tips below to make finding life insurance with a pre-existing condition easier:

Use a broker

Insurance brokers have relationships with several insurers and understand them better than most. A good broker may be able to help you shop around and find the right cover even if you have a pre-existing condition.

Pros of using a loan broker

Shop around

Every insurer is different - there are even insurers who specialise in covering pre-existing conditions. Shop around before you commit to a certain insurer to make sure you’re getting the best deal.

How to compare and choose the right life insurance cover

Provide as much detail as possible

When it comes to insurance of any kind, especially life insurance, disclosure and detail are key.

If you have a pre-existing condition, provide your insurer with as much detail as possible about the condition, the treatment you got for it and any other relevant detail.

How to choose the right life insurance policy for you

How much cover to choose

The lump-sum amount paid by your insurer in the event of your death can be increased or decreased. 

To decide what amount is right for you and your family you’ll have to consider your personal and financial circumstances:

  • The value of your debt repayments. 
  • How much your family spends on everyday living costs. 
  • Your funeral expenses. 
  • Your regular bills. 
  • Major purchases your family is planning to make in future such as a house or car. 
  • The type of lifestyle you and your family live. 
  • Your salary.

A general rule of thumb among insurers is that 10 times your salary is a good level of cover, but you may want more or less depending on your circumstances.

Life insurance premiums: Stepped or level?

Life insurance premiums are charged in two different ways: stepped or level. 

Stepped life insurance premiums

Stepped life insurance premiums increase as you age. 

They may be cheaper than level life insurance premiums at the start but over time they’ll become more expensive. 

This type of premium might be better if you’re expecting to shop around and change policies in future. 

Level life insurance premiums

Level life insurance premiums stay the same throughout your entire policy, with the possible exception of small yearly increases due to inflation. 

These premiums are usually higher than stepped premiums at the start of your policy but may save you money in future.

If you’re wanting to purchase insurance once in your lifetime without switching to a different policy down the line, this may be the better option. 

How to compare trauma and TPD insurance policies

Always shop around and compare life insurance policies before choosing.

Look at each policy in as much detail as possible to decide which is most suitable to your circumstances and needs.

Trauma insurance with Money Matchmaker

Premium amount

Make sure the premium amount is easily affordable and won’t cause you financial stress. 

If the premiums are too high you may be able to decrease them by decreasing your level of cover and/or your benefit amount.

Waiting period

TPD insurance policies usually have a waiting period after you’ve purchased them, during which time you are unable to lodge a claim. Make sure you know the length of this period.

Level of coverage and exclusions

Always make sure you know exactly what you’re covered for under your TPD policy and what your insurer's definition of a total and permanent disability is. 

Check your product disclosure statement or speak to an advisor to be sure. 

Customer service

When shopping for life insurance it’s always a good idea to research each insurer online and find out what their customers think of them. 

If the response is overwhelmingly negative it may be a good idea to avoid them. 

Benefit amount

How much will you receive if you make a claim and what is the maximum amount?

Take a close look at this amount and make sure that it’ll be sufficient to cover the costs you may incur if you suffer an injury or illness that causes total and permanent disability. 

Costs to consider include:

  • Mortgage or rent. 
  • Living costs. 
  • Medical and everyday care costs. 

For reference the Australian government provided the following average costs for treatment of common conditions:

Male Female

Heart attack

$5,060 (25-69 years)

$4,760 (25-69 years)

Stroke

$21,400

$31,200

Type 1 diabetes lifetime cost

$190,000

Flexibility

It may be a good idea to choose a TPD insurance policy that allows you to change your benefit amount and level of cover as your circumstances change. Some policies also allow you to pause your cover during times of financial hardship. 

Inflation proofing/benefit indexation

Inflation proofing or benefit indexation increases your amount of cover automatically to keep up with inflation. 

This is usually done by tying your premiums and level of cover to the consumer price index, and ensures that the real value of your insurance benefit is the same regardless of how long you hold your policy. 

Partial disability benefit

Most TPD insurance policies also include a partial payout if an illness or injury leaves you partially disabled. Partial disablement may include loss of limb or partial loss of hearing.

Death benefit

Some TPD insurance policies also include a death benefit - an amount payable in the event of your death. 

Future life events

This feature enables you to increase your total benefit amount without providing any further evidence of your health or occupation. 

These life events may include marriage, divorce, having children, or securing a mortgage. 

How to compare income protection insurance policies

Sum insured

Sum insured, or maximum monthly benefit, is the maximum amount that your insurance policy will pay out each month when you make a claim.

Usually, this is between $8,000 to $12,000 but it can be higher.

High-income earners should check this before choosing a policy to make sure it will cover their lost income.

Income protection insurance with Money Matchmaker

Indemnity value or agreed value

Income protection insurance policies determine the amount of your benefit in two ways. One option is indemnity value, a percentage of your salary. 

The other is agreed value, a number agreed upon when you sign up for a policy. Agreed value policies are generally more expensive.

If your income fluctuates like most business owners, self-employed people and freelancers, it may be a good idea to select an agreed value. 

This fixes your benefit amount so that it’s not tied to your income.

Length of benefit period

The benefit period is the length of time that monthly payments will last. Most policies offer two to five year benefit periods. 

Length of waiting period

The waiting period is the length of time you must be unable to work before you are eligible for benefits under your policy. 

Most policies have waiting periods of two weeks to one month, but some are up to two years.

What to look for in a life insurance policy for seniors

Every life insurance provider and policy is different. For senior applicants, age and health conditions are often more important factors for approval.

Take a close look at each policy when you’re shopping around to make sure it has what you need. You should pay close attention to:

What does life insurance cover

Value

Just like with any product you want to make sure that you’re getting value out of your life insurance.

That doesn’t necessarily mean finding the lowest price, rather looking for a good price relative to how comprehensive the policy is and how large its payout may be. 

You’ll only know whether a policy offers great value after getting advice from a broker or shopping around yourself. 

Exclusions

Every life insurance policy has exclusions - certain conditions and/or events that aren’t covered. 

Find out what these are by checking your policy’s product disclosure statement or asking your insurer before you sign anything.

Advance benefit payment

In the event of your death your family may have a number of large upfront costs to cover. 

Advance benefit payment means that your family get a fast, lump-sum payment to cover these costs straight after you pass away. 

Bundled inclusions

When you purchase a life insurance policy your insurer may offer discounts on other complementary policies like funeral insurance, trauma cover and TPD cover

Continue reading our series of guides below to learn more about life insurance.

Life Insurance Starter Guide

On this page:

  • Life insurance basics
  • What does life insurance cover?
  • Do you need life insurance?
  • Benefits of life insurance
  • How to choose the right cover

Read more

Types of Life Insurance

On this page:

  • Life insurance policy types
  • Whole term life insurance
  • Life insurance policy add-ons
  • The difference between trauma insurance and TPD

Read more

How to Get Life Insurance

On this page:

  • Life insurance eligibility
  • Where to buy life insurance
  • Life insurance and superannuation
  • The cost of life insurance
  • Free Life Insurance Quote

Read more

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About the Author

Shaun McGowan from money.com.au

Shaun

McGowan

Shaun McGowan

Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.

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