We understand that it’s not the cheeriest topic, but life insurance is a key part of having a good financial plan. It means that if you or your partner die or become seriously ill, you might be able to help your family financially
REASONS TO GET LIFE INSURANCE
To protect your family and loved one’s
If your loved ones depend on your financial support, then you should consider life insurance. It’s especially important if you have young children, or a partner or adult children who couldn’t maintain their standard of living without your income.
To pay off debts and other expenses
It’s not just about providing income to your family to cover their everyday expenses. Life insurance policies will cover outstanding debts like: mortgages, car loans, personal loans and credit card debt. You don’t want your dependants to be left with extra financial burdens. It could also cover the cost of your funeral, if you haven’t taken out funeral cover.
To bring you peace of mind
No amount of money can ever replace a person. But life insurance could provide you and your family with the peace of mind that if the unthinkable happens, they’ll be taken care of financially.
Different types of cover fall under the broad heading of life insurance. Which one you’ll need depends on your situation.
- Life cover – also known as term life insurance or death cover pays a set amount of money when you die. The money is paid to the people you name as beneficiaries in your policy.
- Total and permanent disability (TPD) cover – pays a lump sum to assist with your rehabilitation and living costs if you become totally and permanently disabled. TPD is often bundled together with life cover.
- Income protection – covers your lost income if you become unable to work because of injury or illness.
Your will should:
Do you need income protection?
Income protection insurance replaces the income lost through your inability to work due to injury or sickness. It is especially suitable for self-employed people, small business owners or professionals whose business relies heavily on their ability to work.
Choosing an income protection policy
Each income protection policy has its own definition of disability and range of benefits. Income protection usually offers cover for up to 75% of your gross wages for a maximum time period (e.g. 2 years or to age 60).
Income protection policies may be stepped or level, so make sure you understand what sort of policy you are getting.
Income protection premiums (outside super) are generally tax deductible.
You will need to pick a waiting period when you select your level of cover. This is the period of time (often 30 to 90 days) before you can make a claim.
Take into account your leave balances (e.g. annual, sick and long service leave) and access to emergency cash when choosing your time period.
Many super funds offer income protection. To see what cover is available:
- Contact your super fund by phone or through their website
- Check your member statement
- Read your product disclosure statement (PDS)