So why have Insurance?
To provide money in the event that: You die too soon, become disabled (permanently or temporarily) or suffer a major medical condition.
There are generally four different types personal insurance. You may select one or more of these.
- Life Cover– pays a lump sum when the insured person dies or becomes terminally ill.
- Total and permanent disability (TPD) cover– pays a lump sum if the insured person becomes totally and permanently disabled. Sometimes, a partial disablement can also be covered.
- Critical illness cover also called Trauma insurance – pays a lump sum if the insured person is diagnosed with a specified illness or injury. such as cancer or a stroke.
- Income protection, sometime called salary continuance – pays an instalment benefit if the insured person is unable to work due to illness or injury. Business expenses may also be insured.
How much life insurance should I have?
There is no precise answer. More insurance gives protection but it also depends on your budget and other considerations. Firstly, think about what assets you will have if you or your spouse died or became disabled. What money do you have in superannuation, shares, savings and existing insurance policies?
Then think about your ongoing needs. The difference between what you will have and what you would need is the amount of cover you should get. You may decide to review your cover based on changes to your life-stage. For example, if you have children and a large mortgage you may decide you need more cover. Alternatively, if you’ve paid off your mortgage, you may decide to decrease your cover.