Life insurance has a special part to play at various points in your life. But first, what is life insurance?
There are 4 types of insurance; there’s Life (or death), Total and Permanent Disablement (TPD), Trauma and Income Protection (IP).
Life insurance pays a lump sum amount in the event of death or terminal illness. The purpose of life cover is to pay down any debts, provide an income to your surviving spouse or children, contribute to future education expenses if you have children, and assist with funeral expenses.
TPD is payable in the event you become totally and permanently incapacitated due to sickness or injury, and it is unlikely that you will ever be able to return to work. Again, this cover will provide a lump sum to reduce or extinguish debts, and provide an income to you and your family. It may also help with home and car modifications following your disability and can assist with ongoing medical bills.
Trauma cover pays a lump sum should you be diagnosed with a serious medical condition, or if you suffer from an event covered under the contract. Trauma insurance covers a wide range of conditions such as heart attack, heart surgery, cancer, stroke and other neurological conditions, organ failure and various blood disorders. Benefits can assist with the costs of specialist treatment and medication which are not covered via Medicare or private health cover.
IP covers you if you suffer an injury or illness that leaves you unable to work for longer than your waiting period. Income Protection typically provides a monthly payment whilst you are unable to work. Your claim will continue until you are able to return to work, or you have reached the end of your benefit period. IP ensures up to 75% of your taxable income and you may also be able to cover ongoing superannuation contributions under some contracts.
In your 20s
When you’re in your 20s you have your whole life at your feet. You may or may not be debt free, and may or may not have children. Regardless of these last two points, you have your whole life ahead of you! If something was to happen to you that left you unable to work for the rest of your life and you didn’t have insurance, you would be left having to rely on family or government support. TPD and IP are a must have for people in their 20s.
In your 30s
Your 30s is when the real ‘adulting’ starts. You may start to take on some more debt like a mortgage and may start to have children. Both of which are joyous life events, however, if your partner or family are not protected should something happen to you, they could be left in a very difficult position. Life, TPD, IP and Trauma are essential in protecting your family against the unexpected.
In your 40s
Once you’ve reached your 40s the kids could be in school and taking up all your spare time with after-school activities and you’re still working towards paying off your mortgage or perhaps looking at purchasing an investment property. Again you want to make sure your family is protected. Life, TPD, IP and Trauma are essential in making sure the family home is safe and the kids are able to continue their schooling in the way you intended.
In your 50s
In your 50s the kids are becoming more independent as they start entering the workforce, your mortgage is slowly decreasing and you can start focusing on your retirement. However, all of the hard work you’ve put in over the years to build up your retirement savings could come crashing down in an instant if you were to fall ill or suffer an injury. Whilst you may not need the levels of cover you required in your 30s and 40s, you should still have Life, TPD, IP and Trauma in your suite of protection.
In your 60s
By the time you’re in your 60s, you’d expect the kids to be self-sufficient and mortgage all but paid off. You’re looking into the future to a sunny and relaxing retirement within the next few years. This is when you can start tapering off all of your insurance. It is best to seek advice at this stage (and at all stages) to see what your needs are.
Regardless of where you fall in the above categories, everyone is different therefore having a trusty Risk Adviser to step you through the process will make a world of difference.
Please note, this article provides general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial or insurance advice, please contact us today. One of our advisers would be delighted to speak with you.
Read more articles in our Financial Literacy series.