Term Life insurance

Term Life pays a lump sum benefit if the insured person dies, or suffers a terminal illness. The benefit can be used to help pay outstanding debts and to help cover the costs of future financial needs, such as funding your children’s education.

Changing the conversation

On 1 October, BT became the first retail insurer to expand the terminal illness life expectancy provision from 12 to 24 months. Since then many of the leading research houses have included our new Advanced Terminal Illness definition to their rating criteria.

This latest enhancement is more than a definition tweak, as it changes the needs analysis for a life insurance sum insured.  Conversations are no longer just about the financial impact on loved ones after your client has died, but also how your client might want to live during their last two years.

Who can benefit from this type of cover?

This type of insurance may assist someone who wants to help ensure that their family can still have the lifestyle they planned for, in the event of their death or terminal illness. The benefit can be used for:

  • Repayment of debts like mortgage, loans or credit cards

  • Leaving a lump sum to be invested to cover the cost of the family’s future needs, such as living expenses and their children’s education

  • Protection of the insured person’s business in the event of the death of a key person employee or business owner.

Term Life is adaptable to the needs of the insured person by enabling them to increase the sum insured without providing further health evidence, when a specified personal event set out in the table in section 3.3, or business event set out in the table in section 3.4 of the BT Protection Plans PDS occurs.

What benefits are included in this type of cover?

  • Death Benefit: Pays a benefit in the event of the insured person’s death.

  • Terminal Illness Benefit: Pays a benefit, equal to the amount of the death benefit at that time, if the insured person suffers a terminal illness.

  • Future Insurability Benefit: Allows the insured person to increase the death benefit, TPD benefit and living benefit sum insured, on the occurrence of one of the specified personal or business events without further medical evidence.

  • Financial Planning Benefit: Reimbursement up to the value of $5,000 for the preparation of a financial plan following the payment of a death benefit, terminal illness benefit, TPD benefit, or living benefit. This benefit is paid once for each insured person.

  • Funeral Advancement Benefit: Advances 10% of the death benefit up to a maximum of $25,000 to reimburse the immediate costs of the insured person’s funeral. This benefit is paid once for each insured person.

  • Counselling Benefit: Reimbursement up to a value of $5,000 in total for a maximum of 10 counselling sessions following the payment of a death benefit, terminal illness benefit, TPD benefit or living benefit. This benefit is paid once for each insured person.

What are the optional add-on benefits under this type of cover?

Your client can apply for optional benefits. Unless we have stated otherwise, the optional benefits will require an additional cost. Optional benefits include:

  • TPD Benefit: Pays a benefit in the event that the insured person becomes totally and permanently disabled.

  • Living Benefit: Pays a benefit if the insured person suffers a specified medical event such as cancer, stroke or heart attack.

  • Business Cover Benefit: This benefit is available for policies taken out for business purposes. It allows the insured person to increase their cover if a specified event occurs, to help match the growth of their business without the need for additional medical evidence.

  • Needlestick Benefit: Needlestick Benefit is only available to certain medical professionals and will pay a lump sum if the insured person is diagnosed with occupationaly acquired HIV, hepatitis B or hepatitis C.

  • Children’s Benefit: Children’s benefit pays a lump sum if the insured child passes away or suffers from a medical event covered under the children’s medical event definition in the BT Protection Plans PDS.

What are some of the ways this type of insurance may be structured and what are some of the tax benefits of how it is structured?

Term Life can be held outside of superannuation or within. When held outside superannuation, the policy owners can be the insured person, another individual, a trust, or a business entity. BT allows up to five owners on policies held outside of superannuation. Each policy owner jointly owns the policy. When held within superannuation, the policy is owned by the fund’s trustee, and can be through a MasterTrust, Platform Super or an SMSF.

Premiums are not generally tax deductible outside superannuation but it will depend on the specific circumstances of the policy taken out, such as whether it’s for a business. For example, if your client takes out Term Life and the objective of the policy is to cover the loss of business revenue associated with the loss of a key employee, the premiums paid by the business may be an allowable tax deduction. Any received benefits will generally not be treated as assessable income for tax purposes unless the cover is for the replacement of business revenue.  Term Life proceeds are also exempt from Capital Gains Tax (CGT) in most circumstances.

What are some of the features of BT Protection Plans?

All BT Protection Plans provide the following features, to ensure that your client is receiving the most value out of their policy:

  • CPI increases

  • Guaranteed renewable provided premiums are paid when due

  • Guaranteed upgrades automatically, provided the upgrade does not result in an increase in premium.  Loadings, exclusions or special conditions will continue to apply

  • Loyalty benefit after a policy has been held for 3 years

  • Multi-Policy discount on the premium applicable to the insured person

  • Wrap and Platform Super discount on premiums when benefit premiums are paid through a Wrap or Platform Super account

  • Premium Holiday if a policy has been in force and premiums paid for 6 months, we will allow the insured person to suspend their policy for up to 12 months in certain circumstances of financial hardship and Worldwide cover – 24 hours a day.

Speak to your Business Development Manager or call BT Adviser Services