A report conducted by Lifewise and Natsem in 2010 showed that 95% of families do not have the adequate levels of insurance to cover them if something goes wrong.
Having the right cover and right levels of cover gives you piece of mind in the event of accident, illness or death.
What is Life Insurance?
Life insurance pays a set lump sum to beneficiaries in the event of the policy holder’s death. It sometimes also has application if you are diagnosed with a terminal illness. Life insurance is also commonly known as Death Cover or Term Cover.
Commonly people have some type of Life Insurance perhaps through super, but they have not reviewed it and therefore often have less cover then the amount that would actually be needed for their families to cover expenses.
How much life insurance do I need?
The amount of cover you will need may vary depending on the life stage you are at. If you have a large mortgage and young children you will need to have sufficient cover to pay off your debts and pay for children’s education. Someone at an older age may not have a mortgage and a grown family may not need to cover for themselves as much.
How much will life insurance cost?
There are various factors which will affect the size of your premiums. Obviously the higher the amount you cover, the more expensive it will be. Other factors such as age and health can also affect your premiums. It is based on the risk posed for the insurance company to cover you-the higher the risk, the higher the premium.
There are also differences in premiums based on whether you have stepped vs level in your insurance. Stepped premiums are calculated on your age and will increase every year that you get older. Level premiums are calculated as an average premium. When you are younger you will find you may pay a higher premium but as you get older your premiums often will be less than if you were on a stepped plan. Whilst stepped may seem cheaper you can actually save up to 50% over the total amount of cover across your life by taking out level. It also means that at the age you are more likely to need your cover (in your 50s and onwards) you will still be able to afford your premiums.
Cover in super vs cover outside of super
Having life insurance through your super can be cheaper for you. Generally the premiums are less and there can be tax advantages, as the premiums are being paid from your super contributions. It is important that your beneficiaries are nominated clearly as this can have tax implications and it is also important that you do not use up too much of your super balance. Often with super funds you can only cover yourself for a lesser amount so you may need to take out extra cover outside of your super to ensure your family will have enough money to pay for debts and living expenses.
Read before you sign
As with any type of cover make sure you read the PDS before you sign anything. Every insurance company slightly differs on what they cover, so make sure you are aware of any catches that may prevent you from receiving a claim. Make sure you talk to an accountant or independent financial adviser so you are aware of how much cover you may need and what different options are available.