Life Insurance

Life insurance pays a lump sum on the death of the life insured, or, in many policies, if the insured person is diagnosed with a terminal illness that is expected to result in death within 12 months. The lump sum is intended to replace your future earnings so that dependants needs continue to be met. The insurance amount is based on the debt that needs to be repaid and the level of income your dependants will require to meet their needs, including general living expenses, education, child care and housekeeping.

Life insurance can also be used to “equalise” an estate. This is required when you intend to leave a significant asset (e.g. a business, business property or farm land) to a dependant at the exclusion of others. The life policy can be held so that all beneficiaries receive an equal inheritance.

Consideration always needs to be given to how life policies are to be owned. There are advantages and disadvantages associated with owning life insurance in superannuation which must be taken into account before establishing a policy.