Life Insurance and How much to get?

April 25, 2013 by Edge Financial Planning

With a number of natural disasters over the past couple of years, many of us will be checking our home, contents and car insurance to make sure we’d be covered for similar disasters.
Dramatic weather can be a stark reminder of how our loved ones and the things we work hard for can be put at risk without warning.

So it makes sense to protect those things should the unforeseeable happen.
Putting a personal insurance strategy in place can at least help take financial stress out of the equation in a disaster situation.

Insurance: Protecting what’s important

Insuring your assets like your home, contents and car can provide some kind of financial relief if your property is lost or damaged.

But it’s just as important to remember that you are your biggest asset; yet this is generally the area of most under-insurance.

Unfortunately most Australian families don’t have enough life insurance. A 2009 study1 found the average payout received by families in the event of the death of a partner was just $91,000 – a worrying finding given the average family with young children has debts totalling $167,0002.

For Australian mums and dads this means if something happened, there wouldn’t be enough insurance for their own or their children’s financial needs. And it seems women are the least prepared, with only 50% of mums holding life cover compared with 62% of fathers.

And while no one likes to dwell on the negative, the reality is insurance could protect your family’s financial wellbeing if something happened to you.

Putting an Insurance Plan in place

Setting up a robust personal insurance strategy doesn’t have to be difficult or impact your current lifestyle.
Many people don’t realise how easy and affordable it is to get covered, or what’s available to protect themselves and their family.

Your financial planner can help you identify the types of insurance that best suit your personal situation and set up smart ways to pay so you make significant savings on premiums.

The table below outlines some of the more common types of insurance that could fit into your personal insurance strategy.

What if?

Which insurance is suitable?

What does it do?

You’re temporarily unable to work due to sickness or injury

Income protection insurance

Covers you for a monthly benefit up to 75% of your income to replace lost earnings if you become sick or disabled and are temporarily unable to work

You want to make sure your loved ones are protected if you pass away

Life insurance

Helps your family maintain their financial wellbeing by providing your beneficiaries with an agreed lump sum.

You become ill, and need to focus on getting better, rather than worrying about your finances

Critical illness or trauma insurance

Takes away your financial worries by paying you a cash lump sum if you develop certain critical illnesses so you can get back on track.

You suffer a permanent disability

Total and Permanent Disability insurance

Offers financial security by providing you with a lump sum if you suffer total and permanent disability and are unable to work again.

You’re unable to run your business

Business expense insurance

Reimburses you for fixed expenses incurred to keep your business going if you become disabled and cannot work.

Your business partner passes away, becomes disabled or suffers a critical illness

Life insuranceTotal and Permanent Disability insurance Critical illness or trauma insurance

Insures you or your business partners to facilitate the smooth succession of the business from one owner to another.

One of your employees dies, suffers a permanent disability, or becomes critically ill

Life insurance Total and Permanent Disability insurance Critical illness or trauma insurance

Helps your business offset lost revenue associated with the loss of a key person.

1 IFSA, $91,000 not enough to cover lost life – Australians encouraged to become Lifewise, April 2009

2 For Australian families with children under the age of five, the median amount of debt is $167,000. ABS, Australian Social Trends, Household Debt, cat. no. 4102.0, 2009.

3 IFSA, Australian mothers – undervalued and underinsured, October 2005.

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Important information and disclaimer

This publication has been prepared by Leigh Stafford, Penny Collicoat, Edge FP Pty. Ltd. Authorised Representative(s) of Apogee Financial Planning Limited ABN 28 056 426 932, an Australian Financial Services Licensee (“Licensee”), Registered office at 105 –153 Miller St North Sydney NSW 2060 and a member of the National Australia Bank Limited group of companies (“NAB Group”). Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information. Information in this publication is accurate as at the date of writing (July 2015). In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of the NAB Group, nor their employees or directors give any warranty of accuracy, not accept any responsibility for errors or omissions in this document. Case studies in this publication are for illustration purposes only. The investment returns shown in any case studies in this publication are hypothetical examples only and  do not reflect the historical or future returns of any specific financial products. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. If any financial products are referred to in this publication, you should consider the relevant Product Disclosure Statement or other disclosure material before making an investment decision in relation to that financial product. Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.