7 Things You Need to Know About Life Insurance Including the 4 Types to Consider.
If your life insurance is currently sitting in the “too hard basket”, you are not alone.
The unexpected is not something that many of us like to think about, let alone have a plan for. However, taking the time to plan now may save you a great deal of money and stress in the future.
According to the Underinsurance Report by Rice Warner, less than half of all Australians have enough life insurance cover to maintain their consistent standard of living.
The very purpose of life insurance is to ensure you, your family, and your current lifestyle are protected in the event of death, injury, or illness.
What’s more, is that personal circumstances can change meaning you may think you have enough cover to support yourself, but without understanding the whole picture, you may still be underinsured.
Whether you currently hold no personal insurance, or if you’re worried your current policy isn’t enough, check out the following tips to ensure you are best protecting your finances and your family no matter what gets thrown your way.
7 Things Everyone Must Know About Life Insurance:
1. Life Insurance isn’t just “Death Cover”
Many people often make the mistake of thinking life insurance just includes death cover, also known as ‘term life insurance’. However, this is just one type of important personal insurance.
There are four main types of life insurance designed to protect you from different events that can occur:
- Life Cover – pays a lump sum payment when you die
- Total and Permanent Disability (TPD) Insurance – pays a lump sum to help with rehabilitation and living costs if you become permanently disabled or unable to work again
- Trauma Insurance – covers you if you’re diagnosed with a terminal illness or severe injury
- Income Protection Insurance – pays some of your income if you are unable to work due to illness or injury
2. If Anyone Financially Relies on You, You Should Consider Life Insurance
Life insurance is designed to financially protect your loved ones if an unexpected event occurs. A sudden death, illness, or injury can place enormous stress on your family or others that depend on you.
If this were to happen, insurance cover can help you and your family pay for regular living expenses without adding more stress in an already challenging time.
ASIC’s Moneysmart suggests that if you don’t have a partner or people who financially depend on you, then you may not need life cover, but you should consider other forms of protection.
“Consider getting trauma insurance, income protection insurance, or total and permanent disability (TPD) insurance in case you get sick or injured.”1
3. Life Insurance May Seem ‘Expensive’ But it Can Also Save You a Great Deal of Money Too
For many Australians that are yet to purchase life insurance, it can be the cost that deters them. While insurance premiums can seem expensive, the financial protection it offers can save you a great deal of money when you need it most.
When you think about your regular living costs, you begin to realise how much you and your family rely on your regular income. But if you were to suddenly pass away, how would your family pay for things like bills, loans, and school fees?
What about if you were to suddenly become unable to work and weren’t able to financially provide for you and your family? Or if you had a serious illness or injury, this would likely come with more costs as well. How would you pay for these on top of your regular living costs in the absence of your income?
When you add the numbers up, you soon realise that the benefits of life insurance really do outweigh the costs.
Check out MoneySmart’s Life Insurance Calculator to find out if you need life cover and what expenses your insurance will cover.
4. Life Insurance Policies Require Regular Review
While taking the first steps to purchase life insurance is important, it’s equally important to review your policies over time, especially when you go through any significant life changes.
A change to your occupation or salary may justify a policy adjustment. A life event such as marriage, divorce, or children will likely require an adjustment.
Life gets busy so it’s easy to forget to review your insurance policies when the change occurs. To ensure your insurance policies are right for you, consider engaging with a financial advisor who will regularly review your insurance policies and ensure you are best protected at all times.
5. Don’t Forget About the PDS
As with any policy, don’t forget to check the fine print!
The Product Disclosure Statement (PDS) helps you understand what is covered in your insurance policy, and just as importantly, what is not covered. It will also help you to know under what circumstances you will be eligible to make a claim.
An experienced financial advisor can help you further understand how the PDS and policy inclusions could affect you.
6. Know What’s Already Included in Your Super
Many superannuation funds include some level of life insurance cover. However, often this automatic level of cover may not be enough for your personal circumstances.
According to Canstar:
“The default amount you will be covered for within a life insurance policy through your superannuation is often lower than the cover you can get if you choose a tailored product.”2
Another disadvantage of holding insurance through your super is that your super fund is in complete control of your level of cover and can change or cancel it whenever they want. This may leave you completely unprotected!
7. Work with an Experienced Financial Advisor
When it comes to choosing the right cover for you, a financial advisor can help provide a tailored insurance solution for you.
While you can purchase directly from the insurer, working with an experienced financial adviser can ensure:
- You are getting the most appropriate cover for you;
- Your policies are being maintained and updated regularly, and;
- Your insurance ties in with your overall financial situation.
In the unfortunate event that you need to make a claim, a financial planner can also assist you, making the claim process a lot easier and less stressful for you. According to ASIC, claims are around 50% more likely to be approved when completed with the assistance of a financial advisor3.
At Cambio Group, our experienced insurance specialists will thoroughly assess your situation to determine what the most appropriate insurance cover is for you. No matter what your financial objectives are, some level of life insurance cover should make up part of your financial plan.
Protect what matters most with a personalised insurance plan from Cambio Group. Contact us today for a complimentary initial consultation.
Disclaimer: The information (including taxation) in this website does not consider your personal circumstances and is of a general nature only – unless otherwise stated. You should not act on the information provided without first obtaining professional advice specific to your circumstances.
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