Frequently asked questions
- What is life insurance?
- Why do I need life insurance?
- How much life insurance cover do I need?
- What types of life insurance does Budget Direct offer?
- What’s the difference between Life Cover and Express Life Cover?
- Are there things life insurance does not cover?
- At what age can I apply for cover?
- How do I apply for life insurance?
- Can I change my mind?
- What’s the maximum amount of cover I can apply for?
- Will my cover keep pace with inflation?
- How is the cost of life insurance – the premium – calculated?
- Are there any waiting periods?
- How long am I covered for?
- How often should I review my life insurance?
- Can I change my insurance?
- How does the claims process work?
- How are claims paid?
- If I have a terminal illness and less than 12 months to live, can I apply for an advance payment of my death benefit?
- Do you offer to pay funeral costs in advance?
- Are life insurance premiums tax deductible?
- Are life insurance payouts free from capital gains tax?
- How are premiums paid?
- Can I cancel my policy?
- What’s the difference between trauma insurance and health insurance?
- When it comes to Income Protection Cover, what’s considered to be a ‘serious illness or injury’?
- How much Income Protection Cover do I need?
- Who underwrites Budget Direct life insurance?
DISCLAIMER: The answers to the following questions are general in nature and do not take into consideration your personal circumstances. They should not be viewed as personal advice.
What is life insurance?
Life insurance is a contract whereby, in exchange for a premium, your insurer agrees to pay you (or your nominated beneficiaries) a sum of money (‘benefit amount’) if you pass away or become seriously ill or injured.
There are several types of life insurance, including:
- Life cover – in the event you pass away or are diagnosed with a terminal illness.
- Trauma cover – in the event you sustain a specified injury or are diagnosed with a specified illness.
- Total and permanent disability (TPD) cover – in the event you suffer a serious illness or injury and are unable to work in any occupation or live independently.
- Income protection cover – in the event you suffer a serious illness or injury and cannot work in your usual occupation.
(You must have Budget Direct Life Cover in order to purchase our Trauma and/or TPD cover.)
Why do I need life insurance?
Life insurance is a way to protect your partner, children and other dependents from financial hardship in the event you pass away or become seriously ill or injured.
If you earn an income, your death or incapacitation could leave your family struggling to pay bills like the mortgage or rent, groceries, transport, utilities and school fees.
Even if you work only part-time or are a homemaker, your passing or disablement may force your family to pay for someone to look after the children or another family member.
If you died or became incapacitated, your insurer could pay a lump sum of cash to you or your beneficiaries, including your family. This could help you or your family to:
- continue living in the family home
- pay off the mortgage and other debts
- meet day-to-day living expenses
- pay for the children’s education
- maintain the same standard of living
- provide an inheritance.
In short, life insurance can give you the comfort of knowing you or your loved ones can continue to be taken care of if you pass away or can no longer earn an income.
How much life insurance cover do I need?
It’s up to you to decide how much cover you need, up to the maximum benefit allowable.
Depending on your situation, you may want to cover things like:
- your debts – for example what you owe on your mortgage, credit card, car and personal loans, etc; and
- your dependants’ daily living expenses – the things they would still need to pay for in your absence (e.g. food, transport, education).
A general rule of thumb is to reduce your liabilities by the value of your liquid assets – those that could be sold or accessed quickly in the event of a calamity (e.g. investment properties, savings, superannuation, shares).
Because investment markets fluctuate, the time you need to liquidate your assets may not be the right time to sell. You may find it helpful to consult a finance expert about the best time to convert an asset to cash, to avoid incurring a loss.
Other things that could form part of your decision are the costs of:
- a legacy or inheritance for a relative or friend
- a bequest to a charity
- final expenses, e.g. the cost of a funeral.
What types of life insurance does Budget Direct offer?
We offer several types of life insurance, to suit your needs and budget, namely:
- Life Cover (and Express Life Cover) – in case you die or are diagnosed with a terminal illness (where death is likely within 12 months).
- Accidental Death Insurance – in case you die accidentally.
- Income Protection Cover – in case you suffer a serious illness or injury and cannot work in your usual occupation.
When you take out Life Cover, you also have the option – for higher premium – of adding one or more of the following types of cover to your policy:
- Total and Permanent Disability (TPD) Cover – in case, as a result of sickness or injury, you lose your sight or the use of your limbs or are unable to work or cannot live independently.
- Trauma and Trauma Plus Cover – in case you suffer from cancer, coronary artery bypass surgery, heart attack or stroke (Trauma) plus another 10 ‘trauma events’ (Trauma Plus).
- Children’s Cover – in case your child dies, is diagnosed with a terminal illness (where death is likely within 12 months), or suffers a specified injury or illness.
Terms, conditions, limits and exclusions apply, so always read the product disclosure statement before deciding whether to buy life insurance.
What’s the difference between Life Cover and Express Life Cover?
The main differences between Life Cover and Express Life Cover are:
- Sum insured – Express Life Cover may suit people who require $300,000 or less of cover; Life Cover provides up to $1 million of cover (subject to age).
- Cover options – Express Life Cover does not give you the option of adding TPD, Trauma or Children’s cover to your policy; however Life Cover does.
- Age limit – to apply for Express Life Cover you can’t be older than 50 (next birthday); the maximum age for Life Cover applicants is 59.
- Application process – because of its sum-insured, cover-option and age limits, the application process for Express Life Cover is simple and fast – hence its name. You can apply online and get a decision within a matter of minutes.
Are there things life insurance does not cover?
Yes. There are some situations or circumstances in which we will not pay a life insurance claim – these are called ‘exclusions’.
For example, we will not pay a policyholder’s Life Cover claim if:
- he or she dies or has a terminal illness as a direct or indirect result of a self-inflicted injury within 13 months of their cover commencing
- we have agreed to a term in their policy that specifically excludes the event or condition that led to the claim. This term will be documented in your policy schedule or the product disclosure statement.
For more information about the exclusions that apply to the different types of life insurance, please read the product disclosure statement.
At what age can I apply for cover?
If you are an Australian permanent resident and fall within the following age ranges, you are eligible to apply for cover:
|Cover||Age (next birthday) at application|
|Life||18 - 64|
|Express Life||18 - 50|
|TPD||18 - 59|
|Trauma||18 - 59|
|Trauma Plus||18 - 59|
|Children’s||2 - 17 (your child's age)|
|Accidental Death Insurance||18 - 64|
|Income Protection||19 - 60|
Note: The age at which you can apply for cover and your age at which your cover ends are different. For example, when applying for Life Cover, you cannot be older than 64 (at your next birthday). However, your Life Cover ends when you turn 100 (assuming you reach that age and don’t make a policy-ending claim).
How do I apply for life insurance?
You can apply for our Life Cover, Trauma Cover, TPD Cover, Accidental Death Insurance and Income Protection Cover over the phone – you won’t need to fill out complicated forms or have a medical check-up or blood test.
We’ll ask you questions relating to, among other things, your health, lifestyle and occupation. This will enable us to determine whether we’re able to offer you cover.
You can apply for our Express Life Cover by answering eight questions online or over the phone.
It’s important to tell us anything you know, or could be reasonably expected to know, that may affect our decision to insure you and on what terms.
Otherwise, it could, in a worst-case scenario, result in any claim you make being refused.
Can I change my mind?
Yes. You have 30 days from the time your cover starts (the ‘commencement date’) to decide whether to keep your policy. This is the cooling-off period.
Within that time, you can ask us in writing to cancel your policy. Any premiums you may have paid will be refunded (assuming you have not made any claims).
What’s the maximum amount of cover I can apply for?
The following table shows you the maximum benefit amount you can apply for, depending on:
- the type of cover
- your age (next birthday) when the cover starts.
|Age||Life||TPD||Trauma||Trauma Plus||Children’s||Express Life||Accidental Death||Income Protection|
|18-44||$1,000,000||$1,000,000||$500,000||$500,000||$50,000 regardless of age||$300,000 regardless of age||$500,000 regardless of age||Up to 75% of your pre-tax income (capped at $10,000 per month)|
- Your TPD Cover benefit amount cannot exceed your Life Cover benefit amount. For example, if you were 30 years old and had $750,000 of Life Cover with us, the maximum amount of TPD Cover you could apply for would be $750,000.
- Your Trauma/Trauma Plus cover benefit amount cannot be more than 50% of your Life Cover benefit amount. For example, if you were 30 years old and had $750,000 of Life Cover with us, the maximum amount of Trauma/Trauma Plus cover you could apply for would be $375,000 (i.e. 50% of $750,000
- If you had Life, TPD Cover and/or Trauma or Trauma Plus cover and you were paid a benefit under your Trauma Cover, your Life Cover benefit amount would be reduced by that amount. For example, if you had $750,000 of Life Cover and were paid $500,000 for a Trauma Cover claim, your Life Cover benefit would be reduced to $250,000 (we would reduce your premium accordingly).
- The benefit amount paid under an Accidental Death Insurance policy would be paid in addition to your Life Cover (or Express Life Cover) benefit amount.
Will my cover keep pace with inflation?
Yes. Each policy anniversary we’ll automatically increase the sum you’re insured for (the ‘benefit amount’) by either the increase in the consumer price index over the previous year or five per cent, whichever is the greater amount.
How is the cost of life insurance – the premium – calculated?
The cost of life insurance is calculated according to the likelihood of the policyholder making a claim and how expensive any claim is likely to be.
Calculated at each policy anniversary, the premiums are based on things like your:
- smoking status
- state of health
- amount of cover (the ‘benefit amount’).
Are there any waiting periods?
Yes – there are waiting periods (also known as qualification periods) for:
- Trauma, Trauma Plus and Children’s cover: You can only claim for specified illnesses and injuries that occur or become apparent more than 90 days after your application for cover is accepted.
- Income Protection Cover: Your nominated waiting period of either 30 or 60 days will apply. If, at the end of the waiting period, a doctor confirmed you were still too unwell to return to work, we would begin paying you your benefit monthly in arrears.
How long am I covered for?
After accepting your life insurance application, we’ll send you a policy schedule that sets out the ‘commencement date’ – the date your cover starts.
Provided you pay your premiums, we guarantee to renew your cover each year until your policy ends – regardless of changes in your health, occupation or pastimes.
Your policy ends on the date that the first of the following occurs:
- we pay your claim (Life, TPD or Trauma cover only)
- the benefit amount (the sum you’re insured for) is reduced to nil following the payment of your claim (Life, TPD or Trauma cover only)
- you cancel the policy
- we cancel the policy (where permitted by law)
- you cease to reside in Australia (if on a temporary work visa)
- the policy anniversary after your:
- 100th birthday (Life Cover and Express Life Cover)
- 75th birthday (Accidental Death Insurance)
- 65th birthday (TPD Cover, Trauma Cover, Trauma Plus Cover, Income Protection Cover)
- your child’s 21st birthday (Children’s Cover).
How often should I review my life insurance?
It’s a good idea to review your life insurance regularly, especially if your financial circumstances change.
For example, if you take out a home loan or start a family, you may decide to increase your Life, TPD and or Trauma cover (up to the maximum benefit allowable ).
Conversely, if you’ve paid off your mortgage and your kids have left home, you may decide to reduce your cover.
And if you change jobs or get a promotion, you may wish to reassess your Income Protection Cover.
Can I change my insurance?
Yes. You can apply to increase or decrease your benefit amount (the sum you’re insured for) at any time, provided any increase is within the maximum limits.
You can also add optional cover (e.g. TPD and/or Trauma) to your Life Cover (depending on your entry age); or change your status from a smoker to a non-smoker (a minimum 12 months after quitting), which may reduce your premium.
How does the claims process work?
We understand that life insurance claims can be stressful, so we try to deal with each claim as quickly, efficiently and compassionately as we can. Find out how to make a claim on your life insurance policy.
How are claims paid?
On acceptance of your Life, TPD or Trauma cover claim, your benefit amount will be paid as a lump sum to you (or, if you die, your beneficiaries or legal representative).
If your beneficiary is a minor, the payment will be made to the minor’s legal guardian or trust.
If your beneficiary pre-deceases you, his or her share will be paid to your legal representative or another person we are legally allowed to pay.
Income Protection benefits will be paid monthly in arrears – in other words, you will receive your first benefit payment 30 days after serving out your nominated waiting period. For example, if you selected a 30-day waiting period, you will receive your first payment 60 days after lodging your claim.
If I have a terminal illness and less than 12 months to live, can I apply for an advance payment of my death benefit?
Do you offer to pay funeral costs in advance?
Yes. While assessing a death claim, we may advance $10,000 of the Life Cover or Express Life Cover benefit amount to assist with funeral costs and other expenses.
Are life insurance premiums tax deductible?
In most cases, income-protection premiums are tax-deductible, however all other life insurance premiums are generally not. For more information, visit the Australian Taxation Office website.
Are life insurance payouts free from tax?
It depends on who is listed as the beneficiary, and who actually receives the payout (‘benefit amount’) from the insurer.
Provided it goes to the injured or ill party or one of their family members, the payout is typically exempt from capital gains tax.
The exception is income protection benefits, which would be taxed as income.
For more information, speak to an accountant or tax agent.
How are premiums paid?
You can pay your premiums by automatic direct debit from your bank account or credit card. You can change your payment method at any time – just give us a call.
The premiums are deducted fortnightly, monthly or annually from the ‘first premium date’ shown on your policy schedule.
You get one opportunity a year to change your payment frequency, on the anniversary of your policy.
Can I cancel my policy?
Yes. You can cancel you policy by writing to us and giving 30 days’ notice.
(Your policy may be reinstated within 90 days of the date the policy was forfeited or cancelled, provided we agree and subject to terms and conditions.)
What’s the difference between trauma insurance and health insurance?
Trauma insurance provides you with a lump sum payment in the event of certain serious illnesses and injuries like cancer and stroke.
Depending on the type of health insurance it can cover the costs of some hospital expenses and medical treatment, but generally not additional expenses you may incur as a result of trauma.
These additional expenses can include rehabilitation equipment, ongoing nursing care, home/vehicle modifications and living costs.
In short, health insurance alone may not be enough to protect you in the event of serious illness and injury.
When it comes to Income Protection Cover, what’s considered to be a ‘serious illness or injury’?
One that results in you being unable to work and earn an income from your usual occupation; and requires ongoing medical treatment. The illness or injury must be certified by your medical practitioner and confirmed by one or more medical specialists nominated by us.
How much Income Protection Cover do I need?
It’s up to you. Your decision on what monthly benefit amount to choose (up to 75% of your pre-tax income, up to a maximum of $10,000 per month) will generally boil down to how much money you think you’ll need each month to cover your ongoing living expenses.
Who underwrites Budget Direct life insurance?
Budget Direct life insurance is underwritten by Hannover Life Re of Australasia, a wholly owned subsidiary of Hannover Re Group, one of the largest reinsurers in the world.
As the underwriter, Hannover accepts liability and guarantees payment for Budget Direct life insurance claims that are accepted.
Hannover has been underwriting life insurance in Australia since 1958 and has a financial-strength rating of AA- “Very Strong” (Standard & Poor’s).
It means our customers can rest easy, knowing their life insurance is in safe hands.