What Is Term Life Insurance & How Is It Different To Loan Protection Insurance?

If you’re looking to find a term life insurance plan, we’ve highlighted some key things you might want to consider, helping to make an informed choice on whether you think ALI’s Loan Protection Plan is appropriate for you.

Term life insurance basics

Term life insurance provides a lump sum payment to nominated beneficiaries, such as a spouse or child in the event of a policy holder’s death. 

Term life insurance can allow your loved ones to cover outstanding debts, schooling and other costs. It is also possible that the lump sum payment could be invested by a surviving spouse to help generate a passive income. 

How does it work?

Term life insurance policies provide a benefit if the life insured dies within the agreed term. Insurers calculate life insurance premiums based on an applicant’s age, health, and life expectancy. 

But in addition to this, it’s important to note that ‘term’ in term life insurance relates to an agreed policy length between the insurer and applicant. So, why is this important? 

If the policyholder dies within the agreed term then the insurer should pay out the face value of the policy. However, there will be no pay-out if the policy expires before a policy holder’s death. 

While it’s possible to renew an expired policy, the premiums payable for a new one may be recalculated to reflect an applicant’s current age, health, and life expectancy. Therefore, applicants should expect their premiums to be higher than what they were before. 

How does this compare to ALI's Loan Protection Insurance?

Term life insurance revolves around offering a financial benefit to beneficiaries in the event of a policy holder’s death. ALI’s Loan Protection Plan has a term life component but also provides a financial benefit to policyholders if they suffer from a specified medical event, and up to three monthly benefits for involuntary loss of employment. 

This means policyholders could keep up with home loan repayments or afford costly medical treatment with the help of benefits, when a serious life event strikes, even if death does not occur. 

To be eligible for an ALI Loan Protection Plan, you must be an Australian resident between the age of 18 and 59 years, along with having applied for a loan or loan increase in the last 12 months. You can also alter your cover to suit requirements as necessary within the policy terms and conditions.

Our Loan Protection Plan covers policyholders with financial benefits in the event of three serious life events, including: 

Living Benefit

Our Living Benefit, also known as trauma insurance, provides cover if you were to suffer one of the specified medical conditions, including cancer*, heart attack*, stroke*, paralysis, severe burns, coronary artery bypass*,  Alzheimer’s and dementia, kidney failure, loss of independent existence, and total loss of hearing or sight. For certain conditions, marked above, there is a 3-month waiting period. Refer to the ALI Group PDS for more information.  

Death and Terminal Illness Benefit

If you die, or, suffer from a terminal illness, an ALI Loan Protection Plan may provide you or your family with financial relief in the form of a lump sum payment. 

Involuntary Unemployment Benefit

If you become involuntarily unemployed within the first five years of taking out your Loan Protection Plan, ALI will provide you with up to three monthly benefits to help tide you over until you find new employment. 

If you have further questions about what is term life insurance and how our Loan Protection Plan may provide you with more peace of mind, please contact your local mortgage broker today, or alternatively request a quote here.

Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.