Types of Life Insurance

There are mainly two types of life insurance: Temporary Insurance and Permanent Insurance. Through time however, due to the growing needs of modern living, some subtypes has evolved. They are: term, universal, whole life, variable, variable universal and endowment life insurance. Term life insurance, more commonly known as Life Insurance pays a lump sum upon the death of the insured. “There is no savings component to term life insurance, therefore, the insurance itself is typically more cost-effective than a savings type of insurance and are rarely offered in Australia today. Term life insurance is a policy that will pay a specified sum of money to the estate of the insured upon the death of the insured. In exchange, the insured person agrees to make regular payments of premiums (monthly, half yearly or yearly) to the insurance company.” This according to www.xlife.com.au, Australia’s premier leader in insurance services.

Permanent Life Insurance

Permanent life insurance is a type of insurance that will remain in full force throughout the life of the insured. When the policy matures or when the owner fails to pay the premium due, then that is the only time a permanent insurance can be cancelled. There are three types of permanent life insurance namely: whole life, universal life and endowment. Whole life insurance means a table of cash value is provided by the company and also gives a level premium. Universal Life on the other hand, aims to give greater flexibility in the payment of premium with the possibility of higher internal rate of return. Endowments according to wikipedia.org, “are policies in which the cash value built up inside the policy, equals the death benefit (face amount) at a certain age.”

Total and Permanent Disablement Insurance (TPD):

Total and Permanent Disability Insurance (TPD) is commonly taken as an extra feature with term life cover, or on a stand alone basis. TPD cover provides a lump sum payment in the event of total and permanent disablement. Policies are very similar, in order to claim most have a definition of you being unable to work for 6 months, and it is likely that you will never return to work again.

There are two types of TPD cover, own occupation where the payment is made when you are unable to perform your occupation (this is important for specialist occupations). Or more commonly people have a any occupation definition, where you are able to claim if you are unable to perform any occupation that you are suited to by education, training, or experience.

The number of TPD claims are rather small, if finances are a problem you could consider dropping this insurance.