Finding the best life insurance policies

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From Money magazine, September 2003

Anthony O’Brien shows that you need to shop around for the best life insurance.

There’s some irony in the notion of life insurance: rather than insuring your own life, you’re actually providing for the wellbeing of others (wife, partner, kids) after you’re gone. That’s why some experts call it death cover.

In brief

There are two broad types of life insurance: term and whole-of-life insurance.
Term life insurance is more common and pays a lump sum upon your death (as long as it is not from suicide). Most policies will pay out on death from illness; if you die in an accident, the payout is usually immediate.
The cost of term life cover increases as you get older, but the older you are and more established your financial position the less insurance you are likely to need. This means it can be worthwhile reducing the amount you are insured for over time, to minimise the costs while maintaining some cover.
The policy you select will determine the annual premium you pay. Premiums are determined by your health (you may need to undergo a medical examination), life expectancy, whether you smoke, your occupation and gender and the amount of cover.
Unlike income protection insurance, you can’t claim life insurance as a tax deduction – although the lump sum paid on your death is free of tax.

What Money magazine says

Initially, the premium for whole-of-life cover can be several times higher than the premium for the same amount of term insurance. However, term life premiums become more expensive as you get older and eventually overtake those for whole-of-life insurance.

For the complete story see Money Magazine's September 2003 issue. Subscribe now.

MESSENGER