Do life insurance payouts affect the Age Pension?

Geoff’s death policy pays out to his children, not his wife. How does this affect the pension?

Q. Geoff
My wife and I both have death policies that upon one of our deaths the money will be paid to our two children and not to the other spouse. Will this affect the remaining person’s pension?

A. This is a very common question: what happens to the family finances when a life insurance policy pays out? You’ve gone to the effort of making sure that your children are taken care of in the event that you pass away, but you’re understandably concerned that any payout will affect your income in other ways.

There is a relatively simple answer here. As long as your children are the beneficiaries, then this shouldn’t affect you or your wife’s pension in the event of either of you passing away.

However, if you or your wife are named as a beneficiary on the other person’s policy this changes the situation slightly, as it may affect the pension.

It’s worth checking your policy and looking at who the named beneficiaries are. If you’ve named your wife on your policy or vice versa, then you should get in contact with Centrelink on 13 2300. They’ll be best placed to advise you whether or not your life insurance will affect your pensions.

Life insurers allow the policy holder to change their beneficiary at any time, so if you’re really concerned contact your insurer.

Life Insurance Comparison has a guide to life insurance beneficiaries that should help with any other common questions.

It’s good practice to review your life policy from time to time, so use this as an excuse to go through your term cover with a fine-tooth comb and check things such as exclusions, beneficiaries, and any premium increases. That way you can be confident that you’re covered for everything you think you’re covered for and you’re not overpaying for your policy.

Do you have life insurance? Have you checked that all the details of your policy are up to date?

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Written by Dipisha Chand

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