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How to choose the right life insurance policy for you

Life can be full of unexpected turns, so it’s important to protect yourself and your family from whatever the future holds.

Insurance provides peace of mind, giving you certainty your debts could be repaid and you could continue to maintain your lifestyle if you were unable to work due to illness or injury – and that if you should die your loved ones would be taken care of.


Why do I need life insurance?


How would it impact your family finances if you or your partner suddenly died, or become seriously unwell and unable to work? Life insurance can offer you and your family financial support in these difficult times.


There are four key types of life insurance to consider: life cover, total and permanent disability (TPD) cover, trauma cover and income protection.


1. Life cover


Life cover (often referred to as ‘term life insurance’ or ‘death cover’) pays a pre-determined sum of money to your nominated beneficiaries when you die.


Life cover helps you set up a way to support your loved ones after you die – ensuring they can continue to pay the mortgage, school expenses and buy daily essentials. To decide how much life cover you need, keep in mind things such as your children’s future childcare, education fees, any debts you’ve acquired and what your family will need to live comfortably.


2. Total and permanent disability (TPD) cover


TPD cover pays a lump sum of money should you be totally and permanently disabled and are unable to return to work. The funds can be used to pay off debts, as an income stream, cover for medical/rehabilitation expenses and home care support.


3. Trauma cover


Trauma cover pays a lump sum if you’re diagnosed with a specific illness or injury. Often referred to as ‘critical illness cover’ or ‘recovery insurance’, it covers major illnesses such as cancer, a stroke or heart attack.


This type of insurance helps take the pressure off your day-to-day finances, so you can take adequate time off work to focus on your recovery. Trauma cover helps provide financial support and can be used to help pay out-of-pocket treatment costs, or even explore more advanced treatment options.


4. Income protection


Income protection, also known as ‘salary continuance’, covers lost income should you be unable to work as a result of injury or illness.


It’s particularly suitable for those who are self-employed, small business owners, or professionals whose ability to work is crucial to maintaining their business. The insurance premiums may also be tax deductible.


While each income protection policy will have its own range of benefits, it generally covers up to 75 per cent of your gross salary for a maximum period of time – that is, two years, five years, or to the age of 60, 65 and even age 70.


How can I get a policy?


The three most common ways to get insurance are through your financial adviser, via your superannuation fund or online.


1. Financial adviser


A financial adviser can help you understand the various insurance options and recommend one that best suits your needs and objectives. They will also be able to help you work out your budget and what you can afford to allocated towards insurance.


There are many different types of advisers – some are within the Commonwealth Bank Group, some are part of other networks and some are independent. Use our ‘Find an adviser’ search tool to find an adviser near your, or you can also look at industry directories such as the Financial Planning Association.


2. Superannuation fund


Most super funds offer life insurance to their members. The premiums are deducted from your super account balance, not your after tax income, which may have tax advantages.


It’s important to understand the level of cover you have, in case you need to increase the cover to suit your personal circumstances. A financial adviser can help you work this out.


3. Online


Investing in life insurance online is quick and convenient – there’s no waiting time for insurance documents and you can do it anytime, day or night.


Regardless of how you obtain your insurance policy, it’s a good idea to chat to a financial adviser to ensure you understand your options so that you and your family will be financially secure if anything should happen.

Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (Colonial First State) is the issuer of the FirstChoice range of super and pension products from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557. Colonial First State also issues interests in products made available under FirstChoice Investments and FirstChoice Wholesale Investments. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. The PDS and FSG can be obtained from or by calling us on 13 13 36.