Before you get life insurance, talk through these 6 questions with your financial adviser. That way you’ll have a clear picture of what you’re buying.
Deciding what you need to be covered for is important. You can start by asking yourself (and your adviser, of course): Can I do without any of these types of insurance?
Pays a lump sum in the event of death or terminal illness – to cover living expenses for your dependants, pay off debts, funeral costs and fund palliative care if terminally ill so that your family remain looked after financially.
Pays a lump sum should you become permanently disabled and unable to work – to cover out-of-pocket and ongoing medical expenses, home modifications and to take care of dependants if needed.
Pays a lump sum on the occurrence of certain types of serious illness or injuries (e.g. a heart attack or certain cancers) – to cover an extended break for you (and potentially your spouse) from work as you recover, as well as out-of-pocket medical expenses. This way, you and your loved ones can focus on recovery, not bills.
Pays a monthly benefit to replace part of your income, if you are temporarily disabled and unable to work – to cover everyday living expenses and maintain your lifestyle, while you focus on getting back to work. If this cover meets your needs, you will need to determine how long you wait for your first payment (this is called the waiting period) and for how long you are paid (generally called the benefit period).
When it comes to life insurance, everyone’s needs are different. Working out how much cover you’ll require is as easy as sitting down with your financial adviser and determining a figure that’s not too little, and not too much. This personalised and in-depth assessment will be based on your personal circumstances including: your total debt position, assets including superannuation and property, plus your family circumstances like education and childcare needs.
Buying life insurance isn’t difficult, but it does require some thought. So don’t ever feel pressured to make a quick decision. Take the time to consider your choice, and always make sure you:
Insurance premiums will generally increase over time – simply because health risks increase with age. That’s why most insurers offer two common ways of paying for, and managing, the costs of your cover over time:
Note that regardless of which premium option you select, premiums are generally not guaranteed and increases can occur.
We don’t know what the future will bring. That’s why it helps to plan ahead. You should begin the insurance relationship with an expectation that your cover needs to be continually adapted to suit your needs. The rule of thumb is that your need for financial protection usually decreases over time. For example, if you pay off your mortgage, reduce your debts, or no longer have dependants to look after financially, you may want to review your cover.
You should keep your policy as long as you require financial protection for your needs. If you no longer have debt, or have enough financial resources to maintain your livelihood should something happen to you, then you may no longer need as much cover. Lower cover usually means lower premiums, so it’s definitely worth reviewing your policy every 12-18 months.
Before making your final choice, be sure to consider:
Want to know more?
If you’d like to discuss any of the content in this article and how it may apply to you, please call our office on (02) 9188 1547 or book a meeting in our Oran Park office to discuss your options further.