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The deal with life insurance

Updated on January 28, 2011
So many thoughts that run through your mind with life insurance, put them to rest with good information.
So many thoughts that run through your mind with life insurance, put them to rest with good information. | Source

What is life insurance

Life insurance is like an elephant in the room, its far more aparent about why it is an elephant when the bills come in and money goes out. The pay check comes in and mostly it goes in one direction. Just as sands flow through hourglass, the money just filters through never staying, the nice thing is it goes to build a lifestyle that is comfortable.

While the income keeps coming in, the big elephant in the room is not considered; Nobody ever thinks they would get sick or worse not see their kids children. Until an unfortunate and unexpected situation arises, only then when the option of life insurance has just been obliterated is it contemplated.

Life insurance is not a fun topic nor it is it something to just get out of the way. It needs to be considered and well thought out so that the family is properly covered in case of a tragic situation. Many factors affect the level needed for life insurance cover.

Things to consider when obtaining life insurance:

Current debts – money owing on cars, mortgages, recurring bills, personal loans, credit cards, and expenses relating to raising children, school fees or college funds.

Funeral Expenses– A funeral is a time that is time to reflecting on the persons life, and follow the greiving process, to have small amount of closure. Not worrying how to pay for the funeral, and feeling guilty for spending too much or too little due to expense.

Cover for illnesses– Terminal or critical illness. Illness is a vital thing to obtain in any life insurance policy as there are illnesses that will knock us out of action for 1 - 2 years. With the added stress of finances through loosing an income, can delay recovery.

  • Terminal Illness or injury is generally given a time frame that the person from injury or illness will be 12 months from onset to end.
  • Critical Illness see Trauma insurance its just another name.

Types of Life Insurance and extras available

Term Insurance

For a fixed time this policy will be cover the selected persons life, and most of the basic policies have terminal illness insurance included.

Exclusions in a term policy are suicide within the first 13 months of the policy. Terminal illness is not covered by illness or disease that is deliberately caused by the insureds actions.

Depending on the policy, war is sometimes excluded, pre-existing conditions that weren’t disclosed are not covered.

In the case of it not being covered this means the policy will not be paid out.

Whole life policies also known as Permanent life insurance(with some variations)

Generally provide only death cover that include a savings component at a conservative interest rate, that is then paid to the account holder. It has not been found to be an effective form of investment. The amount that pays out at death accumulates with time.

Universal Life coverage

Is similar to whole of life policies, however the insured can change the nominated amount and this makes the insurance premiums flexible.

Limited pay

Generally means the policy won't be paid over 65 years.

Endowment policies

Endowment policies are similar to whole life policies, however it is taken out for a set time period, and are a combination of savings and death cover. The amount that is paid out on death is larger the longer the policy is held, and the basic policy does include terminal sickness cover, extras are also available.

Accidental death

Total and permanent disablement insurance cover

This is generally an extra to the trauma or life insurance policy, as the name suggests the insured person receives the nominated amount if the unfortunate were to occur.

Trauma cover

Is a policy on it's own or an added extra to a life insurance policy. Trauma's covered are listed in the policy be sure to read carefully, you can pay extra to gain more.

The benchmark for basic cover generally includes, cancer the malignant tumours, heart attack, coronary artery surgery, stroke, or terminal illness. Some companies may expand on this list and add paraplegia, quadriplegia and occupationally acquired HIV.

Future insurability

This ensures that you can re-insure without further medical evidence.

Funeral Cover Expenses Insurance

Can be purchased separately or as an added on extra and in insurance policies such as over 50's life insurances it is part and parcel of the package.

Over 50's life insurance

Cover for people in their golden years to not worry about the recurring expenses or funeral expenses for when they pass, to leave their families without bills. It is paid on death generally less than the maximum of $50,000.00, depending on cover.

Income Protection

Provides payments to the insured in the event of being unable to work due to accident or sickness, generally paid monthly and at 75% of the insured’s wage.


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    • Purple Perl profile image

      Purple Perl 7 years ago from Bangalore,India


    • Abbasangel profile image

      Abbasangel 7 years ago from Australia - The land down under

      No probs Johnny and Thanks Guardian!

      Yeah, life insurance is important! :)

    • Johnny Parker profile image

      Johnny Parker 7 years ago from Birkenhead, Wirral, North West England

      Something I need to take another look at. Good hub, congrats on the win,

    • profile image

      GuardianInsurance 7 years ago

      Great job on this article! It not only clearly explains why we need life insurance but also highlights that there are many different types of insurance that you can add to life insurance (like accidental death insurance) so it's important to really look carefully at different options in order to select the life insurance plan that is best for you.

    • Abbasangel profile image

      Abbasangel 7 years ago from Australia - The land down under

      Thanks guys!! Yes I was so lucky to win the daily draw!

    • oceansnsunsets profile image

      Paula 7 years ago from The Midwest, USA

      Congratulations on your random win for the contest! Great information about life insurance, thanks for sharing.

    • akirchner profile image

      Audrey Kirchner 7 years ago from Washington

      Congrats on the win - cool look!