While it’s not the nicest thing to think about, at some point everyone should take a moment to consider what would happen to your lifestyle, or your family, should the unfortunate happen – whether it is the loss of income due to death, illness or injury. What could this mean for you or your family? And how can we help guard against any financial hardships as a result?
Among the different type of life insurances plans available on the market, there are two types that often battle it out in this area: Life and Income Protection.
To help you shed some light on the world of insurance, let’s talk about what each policy is, what it covers, and who is likely to benefit from it. From here, you should be able to make an informed decision when you decide to compare.
What is Life Cover?
“By definition, Life Cover pays a lump sum to your nominated beneficiaries (i.e. your partner, family member etc.) or Estate in the event of your death or the detection of terminal illness.
Do I need Life Cover?
For young singles embarking on their career, paying for life cover may not be top on the list of priorities – especially if there are no financial dependents. However, when life is measured by milestones – getting married or entering a de-facto relationship, purchasing a house, or birthing a bundle of joy, protecting those you treasure suddenly becomes more important.
What exactly does it cover?
Determining what life insurance covers is a personal reflection of your current life. For some it may just mean covering the costs of funeral expenses, which can vary, but generally speaking can cost upwards of $5,000. For others it may mean ensuring your family can continue to lead their lifestyle, without the added stress of the surviving partner being forced into work whilst caring for young children.
You may want your life insurance to cover the following things:
Loans/Debts: With the cost of living skyrocketing, many Australians have significant financial debts, including private education fees, car loans, mortgage, or credit card. While you and your partner may be able to manage them with your current single or dual income, could the payments still be supported if the financial life line were to be cut?
Children’s Education: A well-rounded education is important for most families, and we’d all love to give our kids the opportunity to grow, learn, and follow the path they love. Many Australians consider including the cost of their children’s education in their insurance calculations.
Medical and Funeral Expenses: Organising the meticulous details of a partner’s funeral alone is a harrowing ordeal, even without the financial burden. Life insurance could cover the costs of the funeral, alleviating that added stress. In addition to funeral bills, there can also be outstanding medical expenses to take into consideration.
Your Dependents: Life insurance doesn’t have to just cover the big debts; it can help with everyday life. If you have children, a life partner, or even aging parents who rely on you, factoring in their needs when considering life insurance can help ensure they are taken care of. Considering their needs can help your family meet their daily expenses for the necessary items, or help an elderly family member have access to in-home care if you can no longer be present.
What is Income Insurance?
For those who work, your job is your livelihood. It pays your rent or mortgage, manages your ever-growing list of bills, gives you freedom to indulge in your beloved hobbies, and allows you to enjoy your daily coffee. For the majority of us, our job supports our lifestyle. But what if you were unable to work due to illness or injury? This is where Income Insurance can help. Taking out an Income Protection policy can replace up to 75% of your wage if you are unable to work because of injury or illness. You can be covered for a short or long period of time depending on your situation, generally nominate a waiting period from 4 weeks to 2 years and be paid a benefit in monthly increments.
Why Do I Need Income Insurance?
You work hard to achieve your level of income, so if it was gone, what would happen to your standard of living? History dictates that accidents, even something as common as falling down a flight of stairs, can sometimes take anywhere up to a year to recover from. With that in mind, do you think you can survive for a year without income? If you were to fall temporarily ill, be unable to work, and were undergoing expensive medical testing, do you think that you or your family can afford to bear the costs? Having a steady income can help you to get back on your feet a lot quicker and go back to enjoying the things that make you happy.
Who Benefits From Income Protection?
Anyone with a job that supports their lifestyle can benefit from Income Protection! Whether you’re the sole breadwinner of your family, a young single embarking on your first “career” job out of University, or a self-employed worker, Income Insurance can be a valuable way of ensuring an illness or injury doesn’t unwind everything you’ve worked hard to build.