LIFE INSURANCE ADVICE MELBOURNE
Be prepared for an emergency
What would your family’s life look like if you or your partner died or became seriously ill and couldn’t work? Would you be able to survive financially? A tragic event like this could expose you and your family to serious financial hardship.
It is a good idea to review your cover regularly, especially if something has changed in your life, for example, if you’ve taken out a home loan, are having kids or starting a business.
Types of life insurance
There are different types of cover options within the realm of life insurance products available in the market and each provider’s offerings are slightly different. Depending on your circumstances you may need one or more of the following:
• Life cover – also known as ‘term life insurance’ or ‘death cover’, pays a set amount of money when you die. The money will go to the people you nominate as beneficiaries on your policy
• Total and permanent disability (TPD) cover – pays a lump sum to assist with rehabilitation and living costs if you are totally and permanently disabled. TPD is often bundled with life cover or it can be stand alone
• Trauma cover – provides lump sum protection if you are diagnosed with a specified illness or injury. These policies include the major illnesses or injuries that will make a significant impact on your life, such as cancer or a stroke.
• Income protection – replaces the income lost through your inability to work due to injury or sickness.
Work out how much cover you need
Compare multiple providers and various options
How much life insurance do I need?
There is no correct answer to this question. However, we can certainly help to guide you.
Here is a very basic example of some of the line items used when we calculate how much death, total and permanent disability, income protection and trauma cover you might need.
• Home mortgage
• Investment loans
• Credit cards
• Personal loans
• Business loans
Liquid financial resources:
• Cash savings
• Term deposits
• Equity in property which would be sold (exclude home and any other property you want retained
• Annual income from personal exertion
• Investment income
• Home mortgage and investment loan interest
• Living costs
• Education costs
• Number of years required
• Taxes upon death
• Accounting and legal costs
• Funeral expense
Income Protection, a good place to start
Calculating how much income protection you need is a straight forward. You just take your monthly gross salary and 75% of that plus super is what you can insure. For most occupations you can get cover up to age 70. Some may have a limited benefit period of just 2 years and some may not get cover at all. You will also need to select a waiting period of say 30 days up to 90 days which is determined by the level of cash savings you already have available should you be out of action for a while.
What’s the difference between stepped and level premiums?
Insurance premiums usually increase with age because the older you get, the more likely you are to make a claim.
For insurance such as life, total and permanent disability or trauma cover, you may be able to choose between stepped or level premiums.
• Stepped premiums – Your insurance premium will increase each year as you get older but is usually cheaper in the beginning. If you’re thinking about this option, it is worth looking at what the premiums will be over the next 5 years, or however long you intend to hold the insurance for, to make sure you can afford the premiums.
• Level premiums – Your insurance premium does not change due to your age but is generally more expensive than a stepped premium in the beginning. Level premiums may increase over time due to inflation adjustments or changes to the insurer’s fees.
If you want to control your costs over time then level premiums may suit you. Premiums are usually higher in the beginning but much cheaper than stepped premiums when you are older. If you intend to hold the insurance for a long time, level premiums are likely to be cheaper in the long run.