This article was written prior to 15 March 2021, before the launch of the new Financial Advice Regime, and was published for information purposes only. It is not being actively promoted by Dollar Insurance. Dollar Insurance does not provide financial advice about the suitability of their products and cannot take into account your personal situation or goals. Before you decide to take out a Dollar Insurance Policy, you should read the relevant Policy Wording document which contains the terms, conditions, and exclusions of the Policy, and seek independent financial advice, if required, to ensure the insurance policy is suitable for you.

You might be hearing a lot about life insurance, especially as you get older. But what exactly is life insurance, and why do people decide to get it? Just like other money matters, this can be mysterious or confusing.

You might be hearing a lot about life insurance, especially as you get older. There are many milestones that can kick off the “Do I need life insurance?” conversation. But what exactly is life insurance, and why do people decide to get it? Just like other money matters, this can be mysterious or confusing.

So, let’s take a few minutes to break down life insurance, and talk about some of the ins and outs of these policies.

What is life insurance?

Simply put, life insurance is cover that pays a lump sum if you die or, in some cases, are diagnosed with a terminal illness. This money (known as the benefit) can go to almost anyone you choose and can be used for just about anything they like.

Most people don’t like thinking about these kinds of worst-case scenarios. It’s not fun and may even feel like tempting fate. Still, it's there to be a backup plan ready—just in case.

Why do people buy life insurance?

There are lots of reasons why people buy life cover. Here are a few:

• They want their family to have something to fall back on – When a breadwinner passes away, it can leave a dent in the household finances. Whether you work full or part-time, out of the house or as a stay-at-home parent, a life insurance policy could give your family time to get back on their feet.
• They want to help their family avoid debt – Car payments, the mortgage, household bills… these still need to be paid when someone passes away. But don’t forget about final expenses, like the cost of a funeral. Life cover could help your family keep up with bills and avoid debt as they plan your final farewell.
• They want a little peace of mind – Unless you have a crystal ball, you probably can’t predict the future. So much of life is beyond our control, from accidents to terminal illness to death. Life insurance can give people comfort, knowing that their family have a little something to keep them going through some of life’s toughest times.

What’s not covered by life insurance?

It’s unlikely that you’ll find a life insurance policy that covers any cause of death you can imagine. If you do, it’ll probably cost a bundle. One way insurance companies help keep their policies affordable is by including exclusions.

Exclusions are basically the things that aren’t covered by an insurance policy. These can be different from insurer to insurer, and they can even differ between two types of policies sold by the same company.

Before you buy life cover, you might want to read the policy wording to understand the exclusions. It might also make sense to talk about these with a close family member, too. This could help your family understand when the benefit will be paid and when it won’t, so there are no surprises when it’s time to make a claim.

Be prepared

Life insurance is designed to help ease the future financial burden of your passing. It may not be the most fun way to spend your time, but it could be an important task to cross off your to-do list.

About the author: Dollar Insurance is all about making insurance as painless as possible, with easy to get funeral cover, for just $1 a day.  

Disclaimer: The information provided in this article is of a general nature only and does not take into account your personal situation or goals. You should consider whether the information is appropriate to your needs and seek independent financial advice, if required, to ensure an insurance product is suitable for you.

Any product information is correct at the time this article was published. For current product information, please visit the Dollar Insurance website.