No one likes to think about death but the reality is that unexpected events can and do happen. That’s why life insurance is so important.
Life insurance cover may provide your loved ones with a lump sum benefit upon your death or terminal illness. While no amount of money could ever compensate them adequately for your loss, the right amount of money could remove the burden of financial stress and cover the loss of income created by your death.
This money could be used for a number of purposes; to pay off a mortgage or retire other debts, to fund your children’s education or to create an investment income stream.
To determine how much cover is the right amount of cover for you, you need to calculate the amount of money that your family would need in your absence. Once an application for life insurance cover is approved, you pay a regular premium to keep it in force. If your premium payments lapse, your cover will likewise lapse.
Over time, as your circumstances change, so too should your life insurance cover. Your cover needs to be flexible enough to meet every circumstance. You might want to increase your life cover amount to reflect added responsibilities such as increased debt commitments. Conversely, you may want to decrease your life cover as your financial commitments reduce. You may also want to consider a policy that allows the benefit to be increased each year automatically in line with inflation.
Total and Permanent Disablement is an optional extra cover that you can add to your life policy. This cover provides you with a lump sum if you become totally and permanently disabled and unable to work.
Critical Illness or Trauma is another optional extra cover that pays a benefit as a lump sum if you are diagnosed with one of a range of specified critical illnesses. These may include heart attack, cancer, stroke or loss of independent existence.
Income Protection or Disability Insurance may provide you with an income stream should accident, injury or sickness prevent you from earning an income from your regular occupation. With income protection insurance you can insure up to 75% of your monthly income. This would enable you to cover your greatest asset, your ability to earn an income.
There are two key decisions you need to make with this type of insurance – you need to choose a waiting period and the benefit period.
The waiting period is the amount of time following an injury that you must wait before you make a claim. Generally the longer the waiting period, the lower the premium is on your policy.
The benefit period is the length of time that you require the income replacement. Obviously, the longer the benefit period, the higher the premium is on your policy.
You may need to ease back into work or even change career after suffering an accident, injury or sickness, so you should ensure the policy recommended to you is flexible enough to continue to assist you with reduced payments if this occurs.
Business expenses insurance is a type of income protection that may be relevant if you own a business. It will reimburse you for fixed expenses that a business continues to pay while you are unable to work because of accident, sickness or injury.
Often you can select an amount of time following your sickness or injury that you must wait before a claim is paid and the longer the waiting period, the lower the cost of your cover. Generally you will have a choice of 14 or 30 days.
Need a review of your Insurances? Contact us today for a free consultation to analyse your current position and ensure your assets and income are properly protected.