Life Insurance; What Is It And Why Do I Need It?

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When it comes to protecting yourself and your family (regardless of whether or not you own a property) life insurance is always a good idea, as it will cover you should something unexpected ever happen.

Property wise, it’s also a great idea to have in place. Chances are, your home or investment property will be one of your largest financial assets, and one you’ve no doubt worked very hard to acquire – so why wouldn’t you want to protect it?

Now, it is important to note that a lot of Australians do already have some kind of life insurance included in their super. However, research has shown that it only covers around 14% of the needs of an average person. That means you may be leaving a gap, and, as a result, putting you and your family at risk in the event that something does happen.

There are a number of reasons you should invest in life insurance, including:

  • You’re not sure how you would afford the mortgage repayments if you were to fall ill
  • You already rely on only one income to make the mortgage repayments
  • You want to protect your family and don’t know where to start
  • You’re not sure of the amount or type of insurance you have in your super

When it comes to life insurance, there are a few different options to choose from, with these being Life Insurance, Total and Permanent Disability Insurance, Income Protection Insurance and Trauma Insurance. Each will provide you with a varying degree of either a lump sum payment or a monthly income in the event of accident, sickness or death. What you’re covered for exactly will depend on what type of life insurance you take out.

To help you get a better understanding of these, I’ve outlined some key points below.

Life Insurance

Life insurance will pay out a sum of money either at the time of the death of the insured person or after a set period of time has passed.

Total and Permanent Disability

Generally speaking (there are specific guidelines to each policy, so it’s important you ask for these before signing on), total and permanent disability means that because of a sickness or injury, a person is unable to work on their own or within any occupation for which they are suited by training, education, or experience.

Income Protection

This is available primarily in Australia, Ireland, New Zealand, South Africa, and the United Kingdom. If you have income protection, you’ll receive benefits if you become incapacitated or unable to work due to illness or accident.

Trauma Insurance

Trauma Insurance is one of the newest types of policies to become available, however, it is already becoming more and more popular as a means of wealth protection. Trauma Insurance, like Life Insurance and TPD Cover, is a lump sum payment, however, it differs in how it is paid out. It is only paid if you are medically diagnosed, rather than disablement or death. For example, it would usually cover you for certain types of cancers.

While all of this might be confronting and seem like a horrible thing to have to think about, it’s, unfortunately, the harsh reality that many families have to face every day. I couldn’t imagine anything worse than losing your home or investments should anything unfortunate happen to a loved one. Could you? I personally insist that all of my clients at least consider these insurances before entering into the world of property.  It truly is better to be safe than sorry!

Have any questions? Feel free to leave a comment below!

Until next time,

Sasha

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