Beginner’s Guide to life insurances and who needs them!
Personal insurance is an essential part of personal finance and should be considered. This ensures protection in the event things go wrong because, unfortunately, sometimes they do!
Did you know that 1 in 3 of us will be disabled for more than three months before age 65?
There is often a great deal of confusion when it comes to personal insurances due to the complexities they involve. However, with the right information at hand, you can work out if it’s right for you and your family.
So what are the types of Personal Insurance?
There are four main types as follows:
- Life Insurance – This cover helps protect your family’s future, in the case of death or terminal illness, with a one-off lump sum cash payment to support a surviving partner and children. It could help reduce debt, pay off a mortgage, be used for an ongoing income, or cover other ongoing expenses like school fees.
- Total and Permanent Disability Insurance – If you’re unable to work again due to permanent disability, a one-off lump sum payment could be used for similar purposes to life insurance. The main difference is, this cover can also be used towards modifying your home, or pay for ongoing medical expenses.
- Critical Illness (or Trauma) Insurance – If you’re diagnosed with a serious illness, for example, cancer, have a heart attack or stroke, a cash lump sum payment could help you cover out of pocket medical expenses or any other expenses.
- Income Protection Insurance – Maintain your way of life if you can no longer earn an income due to sickness or injury. Income Protection pays a percentage of your regular income, on a monthly basis, to help with everyday expenses and mortgage repayments.
Why is Personal Insurance important?
It can provide you with peace of mind knowing that you and your family are provided for in the event things go wrong.
To demonstrate the importance of personal insurance, specifically income protection, imagine you owned a goose that laid golden eggs. If you could insure either of these, which would you choose? The goose or the golden egg?
The goose of course! As the goose is far more valuable because of its ability to keep producing golden eggs.
Think of the goose as yourself and your ability to earn income and think of the egg as any asset of yours, such as a car or home. Most of us insure our car and our home but we don’t necessarily insure something far more important…our income.
Without our income, we wouldn’t be able to buy a car, a house or pay for the ongoing costs involved with owning these assets, such as paying for mortgage repayments.
Do you need to consider assessing your insurance needs?
Personal insurances are vital for most of us, therefore, reviewing your insurance needs may be necessary especially if you tick any of the boxes below:
- You’re the sole income earner for your family
- Have medium–high levels of debt
- Are self-employed
- Married and/or have children
- Received a job promotion
- Had a recent change in employment or occupation
- Had a change in relationship status (i.e. marriage/divorce)
And this list goes on… highlighting the fact it is essential for everyone to assess their insurance needs from time to time.
Can a financial adviser help you?
Reviewing personal insurances and the policies available isn’t easy, that why a financial adviser can help. A financial adviser can assist in many ways with personal insurance and answer questions such as:
- What cover do my family and I need? How much cover do we need?
- What are the differences between the default insurance through my super fund and the insurance an adviser can provide?
- Should I have insurance inside superannuation, outside superannuation or both? What are the consequences of this?
- Can I receive a tax deduction for the premiums?
- Do I have someone that can help me in the event of a claim?
The sooner, the better…especially before it’s too late.
While insurance can benefit children right up to retirees, acquiring insurance while we’re younger is the most beneficial because premiums are generally more affordable and the insurance is easier to obtain due to fewer health issues.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with the assistance of a Financial Adviser, whether the information is appropriate in light of your particular circumstances and needs.
Financial planning services are provided by Eastwoods Wealth Management Pty Ltd ABN 17 008 167 002 / AFSL 237853 trading as Beyond Bank Australia Wealth Management. Eastwoods Wealth Management Pty Ltd is a subsidiary of Community CPS Australia Ltd ABN 15 087 651 143 / AFSL 237 856 trading as Beyond Bank Australia.