“Do I need life insurance” is a common question asked. But knowing what you need isn’t a simple answer.
The world of life insurance can be overwhelming and confusing, which is why we’ve taken this opportunity to explain the different types of cover available to you and why you might need them. It’s all about giving you the information you need to make a well informed decision about whether life insurance is right for you.
But do i need life insurance?
The short answer is most likely. Typically, we all have some type of financial commitment that’s important to us or our family, and if we were unable to earn an income, then those financial commitments become financial stressors in our life’s.
Life insurances role is cover this risk. What would you do if you couldn’t go to work? how would you pay for your mortgage, your rent, or your bills? Would not having your income jeopardise the lifestyle that you’re accustomed to? And worse yet, if you unexpectedly passed away, what financial impact would that have on your partner, your kids or your remaining family? Let’s start by reviewing the four main covers available to you.
Life Cover
Life cover is very simple, its a lump sum payment in the event you pass away. The insurance payout typically funds expenses like paying out a mortgage, to help cover your kids school fees or to cover some living expenses for your family. The insurable amount is completely up to you, but considering your financial commitments is a great starting point. The loss of a parent to a family unit can be emotionally devastating, the long term financial impact can be just as severe.
Income protection
Income protection is there to protect your salary in the event you are unable to complete your typical work duties due to illness or injury. The length of the payment, the payment amount and when the payment begins is depended on the insurance contract. The illness or injury can be permanent or temporary, if you cant do your job, usually you can make a claim. Income protection has the added benefit of being a tax deduction if owned by the individual.
Total & Permanent Disability cover
Total and permanent disability cover, also known as TPD, pays out a lump sum payment in the event your illness or injury is so severe you can no longer complete your normal duties in your occupation again. For example, you could imagine that an individual confined to a wheelchair would have great difficultly working as a tradesman and could potentially be eligible for a claim. If you’re successful in claiming TPD, the lump sum payment would help to cover expenses like your mortgage, medical costs and living expenses.
Trauma cover
Finally, we have trauma cover or critical illness cover. This insurance cover protects you in the event you suffer a serious illness or injury, its important to note this isn’t linked to your ability to work in any capacity. For example, a claimable illness might be a stroke or heart attack, an injury may be a loss of a limb or eyesight. Each insurer has different contracts and definitions, so it’s worth checking with your insurer exactly what’s claimable.
What else?
It’s also worth noting that your ability to hold cover is dependent on your current health and occupation, if you apply for cover you may need to undertake something called underwriting. This is where the insurance company considers your current situation and make an offer for insurance. If you’re in poor health or employed in an high risk occupation, you may be offered insurance with a loading on the premium.
Final Thoughts
Even if an injury or illness has a low probability of occurring, insurance is important. Leaving yourself or your loved ones exposed to the financial burden of you not being here or unable to work can be devastating.
Insurance can be complicated as well, we’d suggest you speak with a professional about your needs. There’s so much more to consider when discussing insurance, covering everything in one article just isn’t possible.
If you’d like to speak to us about your insurance needs, contact us here to make an appointment.
