A couple of months ago I decided to reorganise my insurance, and it prompted my husband to do the same. There were some significant changes that had occurred in our lives including getting married and buying a house, items which we had not appropriately addressed. You should be reviewing your insurance (especially your life insurance) every year or two to make sure you have addressed any changes in your circumstances.
Many people are underinsured
I used to work in banking and insurance and one of the most common things I found was that most people did not actually know what insurance they had and how much. In the developed world Australia is one of the most underinsured nations. We insure our car, our home and our contents, but most of us do not insure ourselves.
What effect does being underinsured have?
Imagine you have a wife and two children and you are the only person earning an income in your household. You have a mortgage, you have bills, you have to pay for your children’s education, you are paying off a car loan and you have to put food on the table. Imagine you pass away. How will all those things be paid for? Do you have enough insurance to cover them? Would you partner be able to re-enter the workforce? Are they going to earn enough to cover all these expenses?
Circumstances change, and so should your insurance
Not a year goes by without something changing in your life. As you get older your family may grow. Your assets will grow as you acquire a larger house, with more things. Your debt may grow to accommodate this. Your job might change but so might your health. With these increasing debts and assets you need to make sure that your insurance is reviewed to reflect this. If you started off your first job with say $100K of life insurance do you think that 20 years later this is going to be enough to provide for your family? I would think in almost all cases the answer is going to be no.
Types of Life insurance
It can be more financially viable to have your insurance through your superannuation mainly because the premiums are being paid from your super not from your after tax income. There are often also fewer restrictions in health checks and commonly the premiums are cheaper.
You do however need to be aware that the coverage may not be the same when insurance is within super. Commonly when within super the covers you have will be linked, so if you make a claim on one (such as TPD) the life insurance portion may cease. There are also often limits to how much you can take out so you may need to top it up outside of super. Also be aware of changing super funds and your insurance ceasing. You will need to investigate this prior to changing and be aware of the possibility that some people will not insure you especially if some kind of medical condition has arisen.
Whatever your situation you need to make sure that you review your insurances regularly to make sure it is accommodating any change of circumstances. This will give you peace of mind that your family will have enough to cover finances if something were to happen to you.