Understanding a life insurance policy document
Setting yourself up with a life insurance policy is one of those things that just comes with a bit of paperwork.
One bit of paperwork you’ll need to pay attention to is your life insurance policy document. Unlike a manual for your new fridge, it’s filled with useful information that will help you understand your life insurance policy.
Let’s take a closer look at what these documents actually are, which parts are most important, and some of the key terms you’ll need to know as you read one.
What is a life insurance policy document?
Your life insurance policy document is an in-depth guide to the contract you have between you and your insurer.
While reading your policy document may be daunting it is well worth your time to peruse.
Since each life insurance provider offers a slightly different product, it’s important to read through your policy document so you know exactly what your policy does and doesn’t cover.
For example, a life insurance policy might simply be just that – insurance should you lose your life. However, you may also have optional extras included in your policy. In that case, you could also be eligible to claim in situations that don’t involve you losing your life.
If you want to see what a policy document may look like, check out the OneChoice Life Insurance Policy Document.
Key sections of a life insurance policy document
There’s a lot of information in a life insurance policy document, so let’s break down some of the key sections.
What events are covered
Take some time to explore the section that explains what events are covered.
This explains under what circumstances you or your beneficiary would receive a benefit payment. For example, it’s common for life insurance policies to cover death from any cause – but only if that death is not self-inflicted within a certain time frame.
This section also explains what isn’t covered (and any exclusions or limitations to the cover), such as death due to engaging in criminal activities, for example.
Additional benefits
Is your life insurance policy just for life insurance, or does it also include serious illness insurance or total & permanent disability insurance? This is the kind of information you’ll want to know before it becomes relevant, and your policy document will outline any additional options you may have available.
The benefit amount
This is the amount you would receive following a serious illness diagnosis or total & permanent disability claim, or how much your beneficiaries would receive following your death.
Your policy document will outline the minimum and maximum benefit amount, which may be subject to your age and underwriting criteria. The amount you are insured for will be shown in your policy schedule.
Premiums
This section covers how your premium is calculated to decide how much you pay for your insurance. Premiums will be affected by your age, your chosen benefit amount, and other key factors such as whether or not you smoke, your health, your job, and whether you’re an avid wingsuiter (AKA, whether or not you’re into high-risk sports).
It’s good to read this section thoroughly as it will also cover how and when you need to make payments.
How to make a claim
If you aren’t familiar with this part, the whole endeavour could be moot.
This section covers how you, your beneficiary or your legal representative can make a claim, what happens next, and who receives the benefit payment.
General information
Frequently asked topics including how to cancel or change your policy, the importance of being honest in your application, and the risks of insurance, are also covered in a policy document.
This makes it vital to read through the entire document to fully understand the details of your policy. This will help minimise any possible confusion or questions down the line, and ensure you pick the right policy for you.
Understanding common life insurance terms
Here are some of the common terms you’ll find throughout a life insurance policy document, and what they all mean:
- Premium: How much you pay for the policy (this could be a fortnightly, monthly, or annual payment).
- Beneficiary: This is the person who will receive the payment from your insurer should you pass away (some policies allow you to choose up to 5 beneficiaries).
- Claim: What it’s called when you, or someone else on your behalf, requests a payment from your insurer
- Policyowner: That’s typically you (the person covered under the policy or the person paying for the cover)
- Benefit amount: The amount of money that would be payable from your policy in the case of your death (or other covered events).
- Policy term: This refers to how long the policy is in place (some types of insurance will last until a certain birthday, or for a certain number of years).
Understanding your cover
If you want to learn more about how life insurance could protect your family, why not request a quote today. And, you can get familiar with our OneChoice Life Insurance Policy Document, to help you explore!
2 Aug 2024