Arranging a life insurance policy was once a choice between term life insurance and whole life insurance, but with the latter now defunct in Australia, term life insurance is what you’ll need to research. If you’re wondering whether term life insurance is going to work for you, here are some pros and cons to help you decide if it fits your needs.
Benefits of Term Life Insurance
When you compare life insurance you’ll quite likely be focused on the premium and the value to you of the coverage offered. Those benefits vary from one policy to the next, but there are some advantages to term life insurance that are pretty much universal:
- It’s easy to find and arrange. Term life insurance is a common form of insurance in Australia, so you shouldn’t have problems finding a policy that meets your needs.
- It’s relatively affordable. Term life insurance tends to be less expensive than the now-defunct whole life insurance. This means you’re less likely to find the premiums unmanageable.
- It’s flexible. Term life insurance gives you the flexibility to choose how long you want your cover to last. This makes it a useful option if you’re on a budget. If you feel that you no longer need the protection, you can simply drop the cover by not renewing it at the end of the term. With term life insurance, there is scope to adapt to changing needs as you get older as you’re not tied into one fixed policy for the foreseeable future.
- Policies may include cover for disability, trauma, and loss of income due to these events.
Downsides of Term Life Insurance
While it’s always sensible to consider whether you may have a need for life insurance, you may also be influenced by your current financial circumstances. Here are some of the potential drawbacks of life insurance:
- Term life insurance has no cash value. If you don’t die during the term, there’s no pay-out once the term has expired. Your family are protected if your death does occur during the term, but if that doesn’t happen then to keep your life insurance benefits you must renew or choose a new policy when the term is up.
- Cheaper policies may be limited in scope. Term life insurance is a cost effective option but there may be some drawbacks if you find a very cut-price policy. The main problem relates to the pay-out that your beneficiaries would receive if you were to die mid-term, as a policy with cheap premiums may not provide adequate financial benefits if you do need to claim.
- Term life insurance must be maintained to remain active. The policies available change over time, so it’s wise to compare life insurance policies each time you update, renew or buy life insurance for another term.
When it comes to life insurance Australia only offers one main option: term life insurance. There is no “whole life insurance” available in this country, so your policy will need to be renewed to maintain your cover. Term life insurance has many benefits, but cash value is not one of them. Compare life insurance policies and premiums to find one that suits your needs.
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