Choosing the right cover

Having adequate insurance cover provides you and your family with financial protection in the event of unexpected death, illness or injury

Life is full of unforeseen circumstances which can affect your plans. Life insurance may help you to meet your financial goals and obligations if you lose your ability to earn an income.

What types of insurance are available?

There are a range of insurance options available that can be tailored to suit your needs and personal situation. The most common types of life insurance include:

Everyone who relies on a regular income needs to consider income protection. Your ability to earn an income is possibly your most valuable asset and should be protected.

Income protection can provide you with a safety net if you are unable to work in the event of a temporary disablement due to sickness or accident. It is designed to help maintain your lifestyle by ensuring your cash flow needs and expenses can continue to be met during a period of absence from work.

The premiums that you pay for this type of policy are generally tax deductible. If you hold your insurance within super, the super fund is able to claim a tax deduction on income protection insurance premiums which can reduce the cost of the cover.

Death cover leaves your beneficiaries with a lump sum to help cater for their financial wellbeing in the event of your death. This will give you the peace of mind of knowing that those who depend on you will not be financially disadvantaged with the burden of maintaining current living standards or making loan repayments.

This is generally taken as an optional extra within a life insurance policy, but can also be arranged as a stand-alone policy. In broad terms it provides a lump sum in the event of a permanent disability that prevents you from returning to work. This lump sum can be used at your discretion to provide for your dependants, to compensate for the loss of your income, repay your debts or modify your home to cater for your disability.

There are certain conditions that need to be met to receive a TPD benefit payment; these vary significantly between insurance providers. Before taking out TPD insurance it is important that you understand the conditions under which the insurance company will pay a claim.

How much cover do you need?

You should ensure your cover is adequate and that you are not over, or under, insured. The amount of cover you need depends on a number of factors such as your:

  • lifestyle needs
  • dependants
  • personal financial circumstances.

You should consider these questions when making a decision about how much cover you require.

Death and TPD cover

Income protection

  • Do you have debts, such as a mortgage or personal loans, etc?
  • If you have dependants, how much would be required to meet their day-to-day living expenses, such as school fees, childcare, etc.
  • Do you and your partner both work and need two incomes to maintain your current lifestyle?
  • How long would you be able to meet your current living expenses without your income?
  • Will your accumulated sick leave cover you for a long-term illness?
  • Could you maintain your super contributions if you didn’t have an income?
  • A financial adviser can help you select the most appropriate insurance options and amount of cover you need. We recommend you speak to a financial adviser to determine the right type and amount of cover for your specific circumstances.

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