Income and life protection

The importance of insurance

It’s easy to think ‘it won’t happen to me’ but the fact is, everyone could become ill or injured, sometimes very seriously. That’s why life cover and income protection insurance could be so important. 

In fact, if you’ve got kids and a good-sized debt, like a mortgage, then you may want to consider the option of having insurances in place.

How much insurance cover do I need?

The idea behind life insurance is very simple. The person or people you nominate in your policy will receive a lump sum payout if you die. The hard part is knowing how much cover to have in place.

Think about your debts including your home loan, and how much your family may need each year to lead a comfortable lifestyle. Your level of cover should see your family able to live without a major disruption to their standard of living.

If you experience illness or injury that prevents you working, income protection insurance provides an income stream usually up to 75-80% of your regular wage or salary. It means you can focus on your recovery knowing your finances remain in good shape.

It's so important to protect the ones you love

Without life cover in place – or if you don’t have sufficient life insurance, your loved ones could face a very different lifestyle from the one they enjoy now if they are no longer able to depend on your income. They could be forced to sell the family home, your children may need to change schools – and all this at a time of immense personal grief.

Having appropriate life cover in place could alleviate the financial stress from your loved ones in situations where they can no longer depend on your income.

Your financial adviser can help you work out how much life insurance you need to protect your family.

Having insurance inside your super – pros and cons

There’s a good chance you have life insurance, and possibly income protection insurance, through your super fund. Should you stick with the level of cover you have through super, increase it or purchase insurance completely separate from your super or hold a combination of both? The answer depends on many factors and a BT Adviser can help determine the right options for you.

There is a commonly held belief that default life insurance through super is usually cheaper because the super fund buys the cover in bulk ('group insurance'). This is not always the case though. Many group insurers have increased their premiums in recent years. 

In addition, while most super funds have a default level of cover, it may not be enough for your needs. This is why it’s worth looking at directly held insurance to see if this is an option for you.

The key point is not to just accept the default cover that's on offer in your super. Do your homework. Be sure your family is protected.

Don't forget about income protection

Income protection insurance can also be taken through your super but it may make more sense to consider such a policy outside super if you can afford it. And it’s definitely something worth looking into. You may have to stop work if you fall ill, but the bills won’t stop rolling in.

Next: Protect your valuables: children, grandchildren and future