We all like to think that our lives will follow a smooth path, largely uninterrupted by unwelcome events. Many of us will be lucky enough for that to happen, but for others things won’t go according to plan. Health issues can crop up, relationships can break down, natural disasters can strike, salary earners can lose their jobs and business owners can go through dips in income or even lose their business. Sometimes these things build up over time, other times they come at us from absolutely nowhere. Sometimes they hurt us individually and sometimes, as with the COVID-19 pandemic, the impact is shared widely.
The goal of this article is to guide you towards setting things up, so that all of this can be shielded from the unexpected with a bit of planning and the creation of a ‘safety net’. The alternative is to put your head in the sand and assume that ‘it won’t happen to me’. Believe me, I’ve seen (and experienced myself) enough unfortunate situations to know that it could.
Of course, you may already have a safety net in place. If this is the case, it would be a good idea to review this anyway, and possibly to review your plan against your current circumstances. In my experience, even those who have everything in place have often not performed such a review for a while. Does the plan still fit your needs?
The bottom line here is that should the worst happen, you don’t want to make it worse for those left behind by not being prepared.
The right insurance will preserve your way of life
The last thing you or your family need in a bad situation is the added threat of losing the family home or having to pull kids out of school. The right combination of life insurance cover will provide enough money to ensure that life is able to go on as well as it can under any circumstances.
The types of life insurance that will, together, cover most situations, are:
- life insurance – this cover can pay out a lump sum benefit to your loved ones in case you pass away
- total and permanent disability (TPD) insurance – can provide a lump sum payment if you were to become permanently disabled due to accident or illness and are unlikely to ever be able to work again
- trauma insurance (critical conditions) – can help if you are diagnosed with a significant illness such as cancer, heart attack or stroke
- income protection insurance – typically offers a monthly benefit to make up for lost income if you can’t work due to illness or injury
Depending on your circumstances, it is important to find the right combination of these insurances.
Something you may also not be aware of is that there are often opportunities to reduce the cost of these insurances by incorporating them ‘inside’ your super fund, so effectively paying for them pre-tax. That said, when paying for insurance inside your super, ensure you are aware of the impact the premiums are having on your account balance.
While you may already have some level of default life insurance cover included in your super, it’s important to consider whether the amount and level of cover is enough for your personal needs. The default cover of typical superannuation funds usually does not meet the full insurance needs of the typical family.
Seeking the advice of a risk (insurance) specialist can sometimes save you thousands of dollars by ensuring you are not paying for life insurance you don’t need, and that what coverage you do have is as tax effective as possible.
If not sure how much cover will be enough, go to the online calculators on our website and use the free life insurance calculator.
Article by Marc Bineham – Money coach, speaker and award-winning author of The Money Sandwich