How much life insurance do I need?
Adam Cursio | Financial Planner
BBus(FinPlan), DipFin, DipFinServ(InsBroq), LREA
Naturally, people carry an element of invincibility throughout their lives, with ill health or accidents being events that occur to ‘other unfortunate people’. However, anyone can be struck down out of the blue by unexpected illness, injury or death.
When do I need life insurance?
Many people generally don’t consider life insurance to be necessary until one of these three things happen:
- They give birth to their first child
- They take out a significant debt to buy a home
- They become self employed and lose the security of sick pay and other employee benefits
While this is the norm, we believe anyone who is gainfully employed should consider insurance in some shape or form, as they become independent and will be a burden on others if they become disabled.
Even if an illness is not life threatening, the cost to a family of its breadwinner/s being unable to work while they undergo treatment can be financially stressful. This stress is magnified when that same person is a parent, is a key individual in a family business, and/or if there is a substantial family debt level.
Reducing the level of financial stress can allow the individual concerned to focus on their recovery, and is one of the key reasons for having insurance. So we believe there is no need to wait for a significant life event to take out life insurance. In others words, start now!
What is life insurance?
Life insurance is a range of policies that provide funding to clear debts, replace current and future income or provide foe medical treatment and financial support when there is debilitating ill health. The main types of insurance available to individuals for personal or family protection are:
– Income Protection: provides a monthly benefit up to 75 per cent of an individual’s pre-disability earnings. Premiums are tax deductible to the individual
– Critical Illness: provides a lump sum to cover the cost of treatment and relieve financial stress in the event a defined trauma is suffered, so the patient doesn’t need to rush back to work
– Total and Permanent Disability: provides a lump sum should an individual become totally and permanently disabled which can provide for ongoing care, home renovations or equipment required in disability
– Death Cover: provides a lump sum to the policy owner in the event of death or diagnosis of terminal illness to
Each of the above insurance types have different eligibility requirements and all should be considered as part of a holistic insurance plan. Some of the policies can also be arranged via superannuation and paid for using the money in your super fund to reduce the cash flow impact of holding appropriate amounts of insurance.
You insure your car but what about your income?
Frustratingly, most people won’t take delivery of a new car without organising car insurance but most hesitate to consider insuring their biggest asset: their ability to earn income. Take a 35 year old with say 30 years to retirement. On even a modest wage, the earning capacity would exceed $2,000,000. That’s money that the family is relying on to ensure a healthy and happy lifestyle. The irony is that the cost to insure this enormous asset is not too much more expensive than the cost to insure a car worth $30,000. This is why there is a huge underinsurance problem in Australia.
Let’s talk
At Cursio Group we are passionate about the need to protect the family with adequate life insurance. We can assist you to ascertain the levels of cover you need and come up with an affordable plan that helps to eliminate the stress of not having the right covers in place, and implement a solid plan so you can concentrate on the positive aspects of life.
Call (03) 9841 2222 to talk with one of our Financial Planners today.
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Any financial advice provided is general in nature. It does not consider your needs, financial situation or objectives. You should consider the appropriateness of this advice to your circumstances before you act on it.