DO YOU NEED LIFE INSURANCE?
Do you need life insurance? It sounds like a simple question, but most people can’t provide a simple answer.
Given the cost of living pressures, we know many of you will be scrutinising costs, and your life insurance might seem ripe for the picking. But you should know that from our experience, we believe almost all Australians need some form of life insurance, and therefore, you need to read this week’s Money in Minutes before you go cancelling any covers!
First up, remember that life insurance forms part of the foundations of your financial house. This means its integral for most of us in order to build a strong financial house.
Many of you likely have pre-conceptions about life insurance, what it is, it’s value (or lack thereof) and many other bits and pieces you’ve heard or picked up on your journey.
So we can get to the point, let us gently get you into adult mode:
- If you’re having a tough time getting by on your salary now, how well do you think your family will get by without it?
- Wives may not believe in life insurance, but widows always do.
- We know you would give your life for your children, so why not insure it for them?
- You and your partner together can handle debt, but can your partner handle the debt on their own?
- If you died, would it be important to leave your family with a home that no-one can take away from them?
- If you had a heart attack, would you rather lose your home or your mortgage?
- Whatever reason you may have for not having insurance now will only sound ridiculous to your family in the event that something happens to you.
Perhaps you’re now thinking you might have your insurance priorities wrong?
Here’s our thinking… If you have children who depend on you, and you rely on your income to survive, then you need at least some form of life insurance.
So, which cover is not negotiable? In our mind, there are two, income protection and life cover.
Income protection: For most of us, our income is by far our greatest asset. Unless you go to work just for the fun of it, you rely on your income and therefore, you need income protection insurance as a backup plan for your salary or wage. Why? If you fall ill or become injured and cannot work for a period of time you need income from somewhere to help with your living expenses. Think about putting food on the table, paying bills, repaying the mortgage, and hopefully, some fun stuff, too. If you don’t have income protection cover then what is your backup plan? Maybe you have a partner who can cover costs, or parents who can chip in, but if you don’t, this cover is not negotiable.
Life/death cover: If you were to pass away, do you have people who depend on you? Do you have a mortgage on your home that these people cannot afford to pay off? Who will provide an income for your dependents to help fund their living costs? If you have children or others who depend on you financially, then you need this cover to pay off debts and leave a lump sum of money to help them out. If this sounds like you, then this cover is therefore not negotiable.
There are two other forms of life insurance, being Total & Permanent Disability cover (TPD), as well as Trauma cover. These two covers are likely going to be advantageous to you, but they may not be essential. We don’t have time to delve into each right now, and we also don’t want to bombard you.
For now, we want you to consider income protection and life cover, as each of these really should be part of a strong financial house. If you agree, then you need to put your adulting cap on and get to work building your protection plan.
Wages to Wealth, our financial fitness program, has everything you need to tackle this hugely important task. It will also offer you guidance on TPD and Trauma cover so as you can decide if you require these covers and how much of each.
On a side note, you may have these covers within your superannuation fund. Please do not assume they are sufficient or even appropriate for your needs. We wish it was that simple, but the reality is that you need to do some investigating and get educated (and every minute invested is worth it!).
If something unforeseen happens to your financial detriment, using life insurances enables you to pass the risk on to a 3rd party for a fee. This will ensure your financial house doesn’t come crashing down and those that matter most are protected.
Please let us know if you need a little more help with this or any other areas of your financial house.
Cheers,
Dan and Dave
