How Life Insurance Works?

There are around 1000 life insurance companies working in Australia alone due to the growing demand. It is quite understandable why companies like iSelect Life Insurance are so popular.

We do not know what tomorrow holds for us, which is why we need to keep our family and loved ones secure in case a mishap happens. This is when life insurance comes into play.

Life insurance is a policy where a person signs up with a company and pays the company premium amount ($30-$40) on a monthly basis for a specific period of time. However, in some cases, the one-time premium might be paid as well.

The insurance is paid for a specific time and the policy pays only if the insured dies within that time period. This is called term insurance. However, some companies also offer payments without any such limitations.

 

How Is The Claim Filed?

When an insured individual dies, the beneficiaries file a claim ‘request for benefits’ with the respective insurance company. The case proceeds as it involves some paperwork, including submission of documents such as death certificate.

 

How Much Time Does It Take To Pay Out The Claim?

Most insurance companies take around a month or two to approve the claim, however, this largely depends on the company that you hire.

 

Can The Payments Be Delayed?

There are certain factors that decide whether the payments should be made or not. The most common cases where payments are delayed are the ones which involve homicides or uncertainties. This is because it becomes a police case and beneficiaries and family members might be suspects to the case. Insurance companies wait out till the beneficiaries are cleared.

Other than that, if the issuer passes away in the first or second year after signing up for an insurance policy then the family members may have to wait for at least 6 to 12 months before they receive payment. This is because of the 2-year contestability clause.

This clause gives insurance companies the right to investigate into the dead person’s case and see if any malafide intentions were involved.

In many cases, you may not get paid if the person died due to suicide. However, this depends on the policy so make sure to pay attention to details.

 

Payment Options

Mainly, there are two options to claim for payments and it is upon the policyholder to determine which one to choose. These two options include installment payout or lump sum amount.

Mostly, people sign up for lump sum benefits because the beneficiaries receive the whole amount in one go. The other option is the installment option. In this case, the beneficiaries are given payments on installments so that they could have a steady cash flow for the coming years.

 

Conclusion

This is how the life insurance system works and benefits you in case you die.  Do you have life insurance or are you still thinking about getting it?  What’s holding you back from protecting yourself from the unthinkable?

I would love to hear your thoughts on this in the comments below.

Cheers!