Life Insurance Policy: How Pay-Out Works?
Life Insurance, also known as Death Cover or Term Life Insurance, makes a lump sum payout to nominated beneficiaries when the owner of the policy passes away during the term of the policy, or for a medically determined terminal illness where the insured is expected to live 24 months or less. Some types of life insurance policies in Perth offer additional payout options and some can be cashed out for the accrued cash value before the end of the policy term.
Types of Pay-Outs
Terminal Illness Pay-Out
Death cover insurance automatically includes a terminal illness benefit. A terminal illness claim can be made if it is medically determined that the insured has a terminal illness with less than 24 months to live. The diagnosis has to be confirmed by at least 2 medical practitioners, one being a specialist in that particular field. The claim must be made during the certification period and not after it has ended. A terminal illness benefit is not a stand-alone policy but consists of an early pay-out that reduces the total and permanent disablement amount of the policy by the amount paid out.
Death Benefit Pay-Out
A death benefit is paid out as a lump sum to the named beneficiary of a life insurance policy on the death of the insured and is not subject to income tax. If there is no named beneficiary the proceeds are paid to the insured’s estate, which may be probated. Beneficiaries have the option to receive either a lump-sum payment or a continuation of monthly or annual payments.
Depending on the type of policy, other types of cash pay-outs that can be claimed for include:
- TPD (Total and Permanent Disability) Insurance in the event of permanent disablement.
- Income Protection Insurance if the insured is unable to work due to injury or illness.
- Trauma Insurance encompasses conditions or serious illness that significantly affects the life of the insured.
These benefits are sold as separate policies or can be linked to standard term life insurance at an additional cost.
Also read: Is Life Insurance Worth the Cost?