Make sure insurance really has you covered
A FUNDAMENTAL personal finance trap is to assume that your super fund’s default insurance cover is adequate for your circumstances. Chances are it isn’t. While the levels of default life cover for some younger members can often be higher than their needs given that many are not married and have no children, default covers are often inadequate for older members with families and debt.
Most Australians gain their life, disability and incomeprotection insurance through their super funds. This means that a useful starting point for measuring your insurance needs is to understand the level of default cover provided.
Inadequate insurance cover can rapidly disrupt a family’s personal finances and investment planning following the death or disablement of a parent or partner that limits the family income.
Debunking some common myths 1. The government will look after me if something happens. Centrelink pays benefits, but it’s unlikely to be enough to cover your current lifestyle. 2. Workers’ compensation will cover me. This only covers incidents that occur during work hours or illnesses that are a direct result of your employment. 3. I’ve already got enough insurance. Research shows 60 per cent of families with dependent children don’t have enough insurance to cover household expenses for a year if the family bread winner were to pass away.
What types of cover should you be considering?
Life insurance pays a lump sum to your beneficiaries on your death.
Trauma insurance pays a lump sum to you on the diagnosis or occurrence of a specified illness depending on your policy such as stroke, canc cancer and heart attack to name a few. You can also take out children’s trauma for the same purpose.
Income protection provides a replacement income of up to 75 per cent of your regular income if you’re unable to work due to illness or injury.
Total and permanent disability pays a lump sum if you become disabled and are unable to ever work again.
Reviewing your insurance should be a part of your overall financial planning strategy. As circumstances change so will your insurance requirements.
New debt, decreased debt, salary increase, a new baby … these are just a few of the life events that should trigger a review of this part of your financial plan.