Although life insurance cannot stop these events from happening, it can help to ease the financial impact of such events, and in some cases it can give your child a better chance of survival and quality of live.

Life insurance for children comes under the trauma insurance category, however unlike trauma insurance for adults, children’s trauma insurance will pay out in the event of death as well as covering a large number of serious health conditions.

How life insurance for children works

Children’s life insurance can work differently depending on the insurance provider.  Some insurers simply offer a standard level of cover as a no-cost option in the parent’s insurance policy, whilst other insurers offer variable levels of cover that will have an effect on the premium.

One thing that all children’s insurance policies have in common is that they can only be taken out as part of a life insurance package held by at least one of the child’s parents.  In most cases the parent must hold both life insurance and trauma insurance for themselves.

What children’s insurance covers

The specific conditions and events covered by children’s trauma insurance can differ between insurers.  Most policies will cover the child’s death, and each policy will also have a list of specified conditions that will be covered by the policy.

One of the policies issued by a major Australian insurer covers the following common conditions:  Cancer, open heart surgery, brain damage, major head trauma, meningitis, meningococcal, lung disease, kidney failure, liver disease, loss of hearing, sight or speech, loss of limbs, severe burns and major organ transplant.

This is just a sample from one policy available, and as we can see there are a large range of conditions that can be covered by a child’s trauma insurance policy.

How insurance can help

One part of insuring a child is protecting against the financial impact of losing them, but arguably a much greater benefit is the lump sum of cash that can be used as a ‘war chest’ to fight off any conditions that are threatening your child’s life, or to cover expenses in  an attempt to improve your child’s quality of life.

As outlined earlier, life insurance for children can cover a diverse range of conditions.  If your child was to suffer a critical illness, the funds from the insurance policy can be put towards accessing the best medical care in the world to improve your child’s changes of survival.  A potential $250,000 insurance payout can give your child access to medical treatment usually reserved for only the very wealthy.

The funds can also be used to improve your child’s quality of life if they were to lose a limb or one of their senses.  The funds from the insurance policy can go towards accessing the best rehabilitation services available, and therefore giving your child the best chance of retaining their quality of life.

Is life insurance for children worthwhile?

As parents, we would all do anything for our children, and in the case of a serious medical event, often money is what is needed to access the highest level of care.  For the sake of a few dollars a week you can ensure that money will not be an issue when your child needs it most.

Seniors have a variety of reasons for needing life insurance.  Some will choose a small policy to cover their funeral expenses, some will require a larger amount to provide a financial buffer for their living partner, and in some cases more complex structures are required for estate planning.

Whatever your reasons are for needing life insurance, your age should not mean that you cannot obtain the appropriate cover.

What is the maximum age for life insurance?

Most life insurance policies have an expiry age of 99.  This means that as long as you keep paying the premiums, the insurer will agree to cover you until you reach 99 years of age.  Once you reach this age the policy will expire and no benefit will be paid.

There are some policies with lower expiry ages and some that are higher, so if you are planning on keeping your life insurance policy for a long time it is worth checking this with any policies you are considering.

Although the expiry age for many seniors life insurance policies is 99, most policies will have an entry age limit that comes in much earlier.

Maximum entry age for life insurance

Most insurance companies will have a maximum age limit for seniors taking out a new policy.  This doesn’t affect existing policies holders, but if you are planning on taking out a life insurance policy later in life, you need to be aware of the entry age requirements.

The maximum entry age for most Australian life insurance policies is between 65 and 70 years of age.

As with most life insurance features, the maximum entry age can vary from one insurance company to the next.  If you have passed the maximum entry age for one insurer, it is worth shopping around as you may still be eligible for a life insurance policy issued by a different insurer.

Medical requirements for seniors life insurance

As we get older our risk of suffering a serious or life threatening illness increases.  For this reason insurers may require that blood tests or a medical exam is undertaken once you have reached a certain age and are applying for a new life insurance policy.

The requirements do vary between the insurers, and they can also vary depending on the amount of cover you are applying for.  Generally the older you are or the more cover you are applying for, the greater the chance that the insurer will impose medical requirements.

Funeral insurance

A common alternative to life insurance for seniors is funeral insurance.

The application requirements for funeral insurance are generally lower, particularly when it comes to medicals, however the cover will often be more expensive than life insurance.

If you are still in good health and have a good medical history, life insurance can be a better alternative to funeral insurance for seniors.

More Australians than ever are seeing the benefits of holding life insurance, however many still think of life insurance as being something that only the main income earner of the household needs.

Of course life insurance is very important for the main income earner, as their loss can in many cases be financially devastating for any family.  Often the loss of the main income earner results in an immediate loss of cashflow to cover the day to day costs of living.

Without life insurance the family will have to rely on savings, which in most cases will not last forever.  Unless another family member can step up to the role of main income earner, the family’s financial situation will quickly deteriorate and may never fully recover.

But what happens when the person lost is not the main income earner?  In this case we are generally talking about the stay-at-home mother (or father), or a partner who perhaps works part time and contributes a smaller amount to the family’s finances.

Let’s take a look at what would happen if the stay-at-home mother was lost to the family, and how the family would be affected financially without life insurance.

In this case we’ll look at Tom and Sally, who have a young family with two sons and a daughter.

Tom worked hard and had a well paying job that he enjoyed.  Thanks to Tom’s income Sally was able to stay at home and look after their three children, all aged under ten.

With a young family Tom knew the importance of insurance, and held a large life insurance policy for himself that would assist his family.  Unfortunately, he had never thought that life insurance would also be important for Sally.

Despite living a healthy life, Sally was diagnosed with cancer at age 36, and sadly she lost her battle with cancer after just six months.

Although Tom enjoyed a decent salary, the family’s finances had taken a significant hit during Sally’s illness.  All of the family’s savings had been exhausted making sure that Sally’s final months were as enjoyable as possible, and their credit cards had also been hit hard for the same reason.

Their already shaky finances were then put under further stress having to pay considerable medical bills that remained outstanding, not to mention the significant costs involved with her funeral.

Tom’s income continued to roll in, and thankfully he could rely on assistance from friends and family to look after the children.  But as the months rolled on, this support continued to decline as people had to return to their own lives.

We all know that being a stay-at-mother is a full time job in itself, and even more so for a family with a couple of young children.  Tom spent a small fortune on child care, and worked as hard as he could to keep the family running, but it was wearing him down financially, emotionally and physically.

Without Sally having had any life insurance, things were very tough.  Of course the emotional effects of having lost Sally far outweighed any concerns over money, but the financial stress certainly didn’t help the situation.

Now let’s take a look at how things could have panned out differently if Tom and Sally would have taken out life insurance on both of their lives, instead of just on Tom’s life.

We already know that Sally had been diagnosed with cancer, but because it was diagnosed as terminal cancer Sally was able to claim on her life insurance straight away.

Although the life insurance could not save her life, it allowed the family to clear all of their debts immediately.  It also allowed Tom to take unpaid leave from his work so that he could spend more time with Sally and the family.

Sally still lost her battle with cancer after six months, but the family was able to enjoy her final months without any financial stress thanks to the life insurance.  In the early part of her illness whilst she still had good quality of life, the family took an overseas holiday to create some lasting memories together whilst they still could.

The funds also allowed them to fly in Sally’s parents from England, who otherwise would have struggled to afford such a trip.

Upon Sally’s death the life insurance covered all of the outstanding medical bills as well as the cost of the funeral.  There was also sufficient funds to allow Tom to take another month of unpaid leave from work to allow him to be with his children during this mighty stressful time.

Tom eventually returned to work when he was ready, and although by this stage there was not a huge amount left from the life insurance, there was enough to place into an account to go towards their children’s future education.

Tom still had to cover many costs after Sally’s death, but because Sally’s life insurance allowed them to pay out their sizable mortgage and car loan, he now had a large amount of additional income available each month.

This additional income allowed Tom to cover the costs of day care for the three children, as well as the cost of hiring a helper which took a lot of stress off Tom by taking care of the cooking and cleaning for two days each week.  Without life insurance this would not have been possible.

Of course the loss of Sally was still a huge blow for Tom, and life wasn’t going to return to normal anytime soon, but at least he could concentrate on the grieving process with his family without having to worry about financial matters.

As you can see, the difference to the family’s quality of life would have been dramatically improved if Sally would have held life insurance.  For Sally it meant she could spend more quality time with her finally over her final months, and it also gave her piece of mind to know that her children would not be financially disadvantaged due to her death.

Life insurance cannot save your life, nor can it make up for the loss of someone else’s life, but it certainly makes things easier when you can remove all financial stress from what is already a very stressful time.

Life insurance can benefit singles and families of all different types in many different ways.

Many people wrongly believe that life insurance is only for families with mortgages, however the following case studies are designed to show how life insurance can benefit almost anyone.

Case Study 1 – The Young Single

David is a 25 year old carpenter from Sydney.  He works hard and plays hard, and isn’t scared to borrow money to fund his love of toys.

He currently has a $30,000 loan on his new ute, a $15,000 loan on his jet-ski and a personal loan of $10,000 which he used to buy new tools.

David is far from ready to settle down, and is happy to rent a big house with a few mates rather than buying his own place.  He has no financial dependants and is happy living the single life.

Like many other young males David sees himself as being indestructible, but a few years ago he took his father’s advice and took out a small insurance package which included $100,000 of life insurance.

David certainly doesn’t expect to claim on his policy anytime soon, but he enjoys the peace of mind knowing that if something did happen to him his parents would not be burdened with having to repay his debts.

Of course David’s parents could sell his ute, jet-ski and other belongings, but David knows that depreciation would make these assets worth far less than the money he owes on them.

David’s small life insurance policy costs him less than $20 a month, but he’s happy knowing that the life insurance payout will save his parents from the considerable financial burden of repaying his debts and covering his funeral expenses.

Case Study 2 – The Young Family

Peter and Sandy are both in their early thirties and have two children aged seven and nine.  They live reasonably comfortably on Peter’s wage and have a large mortgage on their home.

Peter and Sandy have been together since high school, and despite completing a university degree, Sandy has never been employed, instead choosing to stay at home to look after their children.

Although the children are now both in school and Sandy could work if she wanted, she doesn’t feel comfortable in doing so since she has never been employed before, and Peter’s decent wage means she doesn’t have to.

The children mean everything to Peter and Sandy, and for that reason they have locked in their financial security using a range of personal insurances, including life insurance.

Peter has life insurance of well over one million dollars.  At first glance this may seem a lot for an average family, however the money can be very quickly accounted for.

Peter’s life insurance has been calculated to repay their $600,000 mortgage and $20,000 car loan.  He has also included an extra $30,000 to ensure that his funeral expenses will be covered along with any other incidental costs.

What makes up the bulk of Peter’s life insurance is a lump sum to be invested for his family’s benefit.  Peter knows that Sandy would not be comfortable with working full time, so he has allowed for a large lump sum that can be conservatively invested to return an amount equal to his annual income for the next twenty years.

The amount is significant, but it will comfortably see the children through their schooling years, including university if they choose.  Peter hopes to provide this support from his income whilst still working, but thanks to his life insurance he will still be able to provide it even if he isn’t around.

Peter and Sandy know that their financial security doesn’t just rely on him though.  Sandy is also an important part of the family, and her loss would also have a massive impact on the family, including a financial impact.

For this reason they also have a life insurance policy on Sandy.  Sandy’s life insurance policy is smaller that Peter’s, but is still large enough to repay a portion of their mortgage, which will relieve some financial stress from Peter in what would be a very stressful period.

Sandy’s life insurance also includes a lump sum of $50,000 to be invested for the benefit of their children.  This money will be given to her children when they reach age 21, giving them a great head start in life.  It’s her way of giving her children a helping hand if she can’t be there in person.

Peter and Sandy plan to be around to see their children turn into adults and have their own families, but at least they know if something does happen, their children will be looked after financially.

Case Study 3 – The Empty Nesters

John and Margaret are in their late fifties, and thanks to some good financial decisions when they were younger, they are able to live comfortably on a combination of John’s part-time consulting work along with their investment income.

They have four adult children, three of whom live with their own young families overseas.  Two of them are in the UK where the family was original from, and one in the US.

John and Margaret have a small mortgage on their family home, which was taken out a few years prior to for some renovations.  Other than that they have no major debts besides a small credit card balance.

Although they know that their home and other investments could be sold to comfortably cover their debts and leave their adult children with some money, they would like to keep their beachside home of thirty years in the family, to be used by the family members whenever they wish.

To achieve this, John and Margaret have each taken out modestly sized life insurance policies.  The policies are not large, but are sufficient to repay their small mortgage and cover their funeral expenses.

John and Margaret did not want to burden their children with the considerable costs of flying their young families back to Australia for a funeral, so they also included an additional $100,000 in their life insurance policies that would allow each of the three overseas-based families to return to Australia without having to worry about the cost.

Although life insurance isn’t exactly cheap for John and Margaret due to their ages, the premiums are affordable given the relatively low amount of cover required, and the cost is worth it for them, knowing that their children will not be burdened with the costs of flying their families back to Australia for a funeral.

Furthermore, the life insurance money will also ensure that the family home can be kept in the family for their exclusive use, which is very important to both John and Margaret.

Life Insurance is for everyone

As we can see, people of all ages and all financial situations can benefit from a well planned out strategy that incorporates life insurance.

We all have different goals and objectives in life as well as death, and life insurance can help us to achieve them in a cost effective way.

Life insurance is often looked at in terms of saving your loved ones from financial hardship in the event of your passing.  But there is more to life insurance than simply paying out your mortgage.

It is true that the majority of life insurance holders take out cover to the big ticket items.  Generally this is to extinguish personal and business debts, cover funeral expenses and in some cases to provide ongoing income via investment of a lump sum amount.

A less common strategy for using life insurance is for estate planning.  Before we get into the details, we should start by covering exactly what estate planning entails.

Estate planning is the process of ensuring that, upon your death, your assets are distributed to the right people at the right time, and with the most favourable tax outcomes for all involved.

Including life insurance as part of your estate planning, and included in your will, is about more than just bolstering the inheritances of your loves ones, but of course this is one option.

Many Australian parents and grandparents would love to be able to give their loved ones a great head start in life by leaving them a healthy inheritance.  For some people this won’t be a problem, but for many people they’d love to be able to give more.

A life insurance policy can be included in your estate planning process, and basically it will provide additional funds that can be distributed to the beneficiaries – your loves ones.

The proceeds of a life insurance policy paid out upon your death with generally be tax free for most of your beneficiaries, but it is important to check which of your beneficiaries will and won’t be taxed, and plan the distribution of your life insurance proceeds accordingly.

The strategy of simply bolstering your estate using life insurance is a fairly straightforward one, but there are more complex strategies where life insurance can be used effectively.

There are many issues that can come up in the time after your death, and unfortunately this period can tear apart even the closest families, as unfortunately the distribution of money can really bring out the worst in people.

So how can life insurance help in this situation?  It all revolves around the subject of estate equalisation.

A common issue with the distribution of estates can revolve around property.  Often the family home will be your estate’s largest asset, and if you have multiple loved ones included in your estate, generally you will have to split the home between these people.

The problem with splitting the family home between your loved ones is that they cannot all live in the home together, unless the home is very large!  Instead, the only option for many families is to sell the home and then distribute the proceeds amongst the family members.

But what if one of the family members don’t want to sell the home?  Maybe they could buy the shares of the other family members, but that’s not always possible.  There are also other occasions where the family home, or any other significant asset, may not want to be sold.

Under normal circumstances this can result in major disagreements between your loved ones, which is the last thing you want when they should have this time to grieve together instead of arguing with each other.

Thankfully there is an easy solution to this problem, and it involves the inclusion of life insurance in your estate plan.

Let’s take the example of the Smith family.  They have a family home worth $800,000 as well as cash and shares totalling $600,000.  They also have four adult children which the estate is to be equally distributed amongst.

If each of the children were happy to tell the family home, the distribution of the estate would be very straightforward, however one of the adult children still lives in the family home with his wife, and would like to stay there.

The other three children are happy for him to remain in the home, but they want their share of the home’s value in cash, as they were entitled to in the will.  His share of the home is worth $200,000, but he does not have access to the remaining $600,000 that he requires to pay out his siblings.

Under normal circumstances they would have no choice but to sell the home, which would leave one child very unhappy.  The other children would get their money, but they still wouldn’t be happy to see their sibling miss out what they wanted.

Unfortunately, these types of situations can very quickly deteriorate and can create major rifts between otherwise close-knit families.

Thankfully the parents had a life insurance policy valued at $1,800,000.  This mean that child one received the $800,000 family home, and the remaining three children each received $200,000 worth of cash and shares, as well as $600,000 each from the life insurance policy.

The overall outcome, thanks to the life insurance policy, was that each child received their $800,000 share of the estate and that child one received the family home that they so dearly wanted.

As you can see, life insurance had a major positive impact in this case.  The parents did not require life insurance to repay any debt since they were debt-free, and they did not require life insurance for living expenses or any other reason since they had around $600,000 in cash and shares which would have comfortable seem them through the rest of their lives.

The Smith family is just one example of many cases where life insurance can be used in a positive way as part of your estate planning.  Of course you could be paying premiums on the life insurance for a long period of time, depending on how long you life for, but those premiums will provide a healthy return when the time comes to distribute your estate.

Please remember that there can be tax consequences when distributing life insurance policy proceeds after your death, so it is important to take these factors into account when deciding on how to structure your life insurance.

All working Australians will hold superannuation in one form or another.  Whilst we have the choice to place our super with any provider we choose, or even to manage our own funds, many Australians still have an industry fund or an employer sponsored fund.

In many of these industry and employer sponsored super funds there will be automatic inclusion of life insurance.  There are certainly some benefits with this structure, however there are some major issues that must be considered before you decide whether or not this insurance structure is right for you.

Life insurance held in this manner is generally known as ‘group life insurance’.

Benefits of group life insurance

Essentially there are two main benefits with holding your life insurance within an industry or employer fund.  First up, most funds will provide automatic acceptance up to certain limits.  This means that you do not have to undergo any medical or blood tests, and you don’t even have to complete an application form in most cases.

The second benefit is cost.  Generally speaking, the premiums for group life insurance will be cheaper than the price of obtaining ‘retail’ cover through a financial adviser or directly from the insurer.  The reason for this is that your super fund is buying the insurance in bulk and can obtain significant group discounts.

Despite these benefits, there are a number of issues to consider, and they can have a major impact on the financial outcomes for your family in the event of your passing.

Issues with group life insurance

Although you will generally not require medical tests or blood tests for group life insurance, the downside is that the levels of cover can be very restrictive, and may not appropriate for your needs and objectives.

Although industry super funds have improved their insurance offerings over the last few years, in some funds you will find yourself restricted to around $250,000 in cover.  Given the average mortgage size in Australia, this maximum may not be appropriate for many Australians.

In most cases the insurer will also reduce the amount of cover as you get older.  Using one of the largest industry funds as an example, their standard maximum cover of $250,000 is only available up to age 40, at which time it will reduce to $186,000.  At age 50 it will reduce to less than half of that at $83,000, and at age 60 it will drop all the way down to $25,000.

It’s fair to say that these amounts would fall grossly short of the actual life insurance needs of most Australians within those age brackets.  You can top up these amounts by taking out a second life insurance policy outside of your superannuation, but having multiple life insurance policies can add further complications and costs.

Control of your life insurance payout

When you hold your life insurance within any superannuation fund, the insurance is actually owned by the fund and not by you.  In the event of a claim, the claim proceeds will initially be paid not to your estate or your loved ones, but instead to your super fund.

In most cases this is not such an issue, as once your life insurance claim has been paid into your super fund, the full amount combined with your super balance will then be released to your estate and onto the people who need it most, which of course are your family and loved ones.

Whilst this is the case most of the time, there can be complications.  Although your super fund will allow you to nominate who your insurance and super proceeds are paid to, under a standard nomination the super fund is not actually bound to pay the funds to that person.

For example, if you have nominated a person who is not related to you to receive your life insurance benefits, the super fund trustee may override your nomination and will instead pay the benefits to a current or former spouse.

This issue can be overcome through the use of a ‘binding nomination’ however these must be renewed regularly and not all industry super funds have the ability to accept a binding life insurance nomination.

Comparing apples with apples

In addition to the issues we have covered so far, there are a number of other differences between group life insurance held with your superannuation, and retail life insurance obtained through a financial adviser or direct from the insurer.

Group life insurance is generally a very basic policy with most of the extra features and benefits stripped out.  The reason for this is twofold; firstly to reduce the premiums to a minimum and secondly due to the restrictions put in place by the Superannuation Industry Supervision Act 1993.

Benefits not available with group life insurance include the following:

• Financial Advice Benefit – A payment of up to $2,000 to allow your loved ones to obtain financial advice on how to best utilise your life insurance payout.
• Accommodation Benefit – A payment of up to $150 per day if you are confined to a bed due to a terminal illness.  These funds can be used to pay for accommodation to ensure your loved ones can be close to you during this stressful period.
• Child Cover – A payment of up to $150,000 if a child dies or suffers from a listed critical condition.  These funds are commonly used to fund treatment and to allow you to take time off work when you need it most.

The specifics of these benefits do vary from one policy to the next, but in most cases they are included free of charge as a standard benefit.  They are only available in a retail fund however, and not within group life insurance.

There are many areas to consider when deciding on the right type of life insurance.  Group life insurance is generally cheaper and has an easier application process, however it also has some fairly major limitations in terms of the amount of cover and the benefits available.

A retail life insurance policy on the other hand will give you more control over how much you are covered for and how that cover is distributed at claim time.

Macquarie Life Insurance

Macquarie Life is part of the Macquarie Group which was founded in Sydney on January 1970 by the work of just three people, Macquarie Life has taken a series of steps to reach its high stance in the insurance industry at Australia. Macquarie Life offers a number of policies including life insurance, TPD insurance, trauma insurance and income protection.  They also have an innovative product called Life Active, which rolls life, TPD and trauma into a single policy that pays out benefits based on the severity of the condition. The only option that is really considered as “life” insurance as defined in other companies is their term life cover. Term life cover refers to the policies in which a lump sum payout is given to the nominated beneficiary to pay off a mortgage, funeral expenses, and other necessary payments.

Use the form on the right hand side of this page and one of our expert consultants will call you to discuss your specific needs; in most cases we are able to tailor a Life Insurance policy to your needs. We can also help you decipher anything you do not understand and provide you with a free, no obligation, life insurance quote.

AIA Life Insurance

AIA Australia is another insurance company that focuses on individuals and corporations. For individuals, AIA Australia offers life cover plan, crisis recovery plan, disability income plan, business expenses plan, and superannuation life cover plan.

Life cover plan and superannuation life cover plan are the policies that are the most relevant to Life Insurance.

The life cover plans offered by AIA Australia are: life cover benefit, 5-year term, 10-year term, and accidental death. Accidental death only compensates in death resulted by accidents. Through the 5-year and 10-year terms, the insured receives the money only if the person dies or is diagnosed with a terminal disease before the term expires. Another difference of the life cover plan is that along with all the features of the three other plans, this plan also enables the insured to get additional benefits with extra costs. These benefits include crisis recovery, crisis recovery buy-back, crisis reinstatement, female crisis assistance, child’s recovery, total and permanent disablement, total and permanent disablement buy-back, waiver of premium, and forward underwriting benefit.

Superannuation life cover plan is very similar to the life cover plan in the sense that along with the superannuation life cover, there are superannuation 5-year term cover, superannuation 10-year term cover, and superannuation accidental death. But, this plan also has another option called superannuation PLUS, which includes all the additional benefits that would have to be paid separately for the regular superannuation life cover.

Because the superannuation life cover plan is through the trustee, the policy has stringent requirements for eligibility, which are listed in the Priority Protection Product Disclosure Statement (PDS).

Use the form on the right hand side of this page and one of our expert consultants will call you to discuss your specific needs; in most cases we are able to tailor a Life Insurance policy to your needs. We can also help you decipher anything you do not understand and provide you with a free, no obligation, life insurance quote.