How much cover do you need?
If you have debt, dependents or are married, then insurance could be critically important for you. The question to ask yourself is how would you or your loved ones manage if you no longer had an income?
Then consider what you want insurance to pay for in the event of your injury, disablement, or death, such as funeral expenses, mortgage, loss of future income, family living costs etc. Try to put a cost to those expenses and then consider what you already have (assets such as superannuation and cash savings). Your insurance can make up the shortfall.
Even thinking through the matters above doesn’t mean it’s easy to decide what you need. To help you, the Moneysmart life insurance calculator takes you through what cover you will need and what insurance could cover if you die. It could be a good place to start.
“Income protection, total and permanent disablement, and death insurances should be reviewed regularly. Your life and circumstances will change, and your insurance should change with it. At certain times you’ll need more cover and other times you will need less,” explains Ng.
“It’s also worth reviewing what you need to do to make an insurance claim. For example, how does your super fund define ‘total and permanent disability’? And what do you need to show to make a claim? Being aware of the conditions to receive a benefit payment can be important if you need to claim.
Lastly, consider the impact of insurance costs on your super balance. While super is an efficient, cost-effective way to have insurance, the fees will lower your balance. Even if that doesn’t seem significant, over time that will add up.
Byron Smith