Articles

Do I Already Have Life Insurance?

by Paul Pulgerino Financial Planner

If you have ever been employed, there is a good chance you already have some insurance cover. It’s important to understand what insurance you already hold and decide whether the level of cover you have is right for you.

Here are two simple steps you can take:

  1. Check your super fund.
    Most Australians have at least one super fund, and most super funds provide a minimum level of automatic insurance cover for members. The fund will be able to tell you what cover you have in place.
  2. Check with your employer.
    Some employers have insurance in place for their staff. This may be through their super fund or through a separate standalone insurance scheme

How much insurance do I need?

Working out how much cover you need to secure your future shouldn’t be difficult. It’s about asking yourself the right questions and working through a simple process for each type of life insurance.

How much term life insurance is enough?

When purchasing term life insurance, the question really isn’t how much you need, but how much your family will need if you are no longer with them, which depends on two variables:

How much will be needed at death to meet immediate obligations?

This amount takes into account all final expenses: uncovered medical bills, funeral, and estate-settling costs, outstanding debts, mortgage balance, and education costs to name a few.

How much future income is needed to sustain the household?

This is the number you’ll arrive at after calculating the “present value” of money your family will need after your death.

Consider:

  • Income – how much are you likely to earn in the future?
  • Dependents – do you have children or other financial dependents?
  • Debts – do you have a mortgage, loan or other debts?
  • Assets – have you accumulated any assets over the years, like property or shares?

How much income protection is enough?

Most income protection policies will provide you with cover for up to 75% of your gross income. This is typically enough to cover the essential costs of living.

How much total and permanent disability (TPD) insurance is enough?

This type of cover is usually an inexpensive add-on to term life insurance. You should consider how much insurance you would need to maintain your standard of living if you became disabled and unable to work again.

How much trauma/critical illness insurance is enough?

The purpose of trauma insurance is to keep your life on track if you suffer a severe medical condition. Many policies allow you to set your own levels of cover. You should consider how much income you would need to live on if you could not work for a period of time due to a serious medical condition.


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About Paul Pulgerino Innovator   Financial Planner

22 connections, 2 recommendations, 98 honor points.
Joined APSense since, April 17th, 2017, From Melbourne, Australia.

Created on Jul 13th 2019 01:04. Viewed 104 times.

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