What’s your greatest asset? Life insurance forms a critical part of the financial planning process, providing financial security for you and your family. A sound financial plan will encompass both wealth creation and wealth protection.
Life is full of unforeseen circumstances which can affect your plans. Life insurance may help you to meet your financial goals and obligations if you lose your ability to earn an income.
Life insurance shifts the financial burden from you to the insurance provider who can afford to protect you because of the pooled premiums paid by their customers. Put simply, life insurance is there to provide you with protection against the financial impact of an event such as death, disablement, serious illness or injury.
There are a range of insurance options available that can be tailored to suit your needs and personal situation. The most common types of life insurance include:
Everyone who relies on a regular income needs to consider income protection. Your ability to earn an income is possibly your most valuable asset and should be protected. Income protection can provide you with a safety net if you are unable to work in the event of a temporary disablement due to sickness or accident. It is designed to help maintain your lifestyle by ensuring your cash flow needs and expenses can continue to be met during a period of absence from work.
The premiums that you will pay for this type of policy are generally tax deductible. If you hold your insurance within super, the super fund is able to claim a tax deduction on income protection insurance premiums which can reduce the cost of the cover.
Life insurance cover leaves your beneficiaries with a lump sum to help cater for their financial wellbeing. This will give you the peace of mind of knowing that those who depend on you will not be financially disadvantaged with the burden of maintaining living standards or making loan repayments. As a general rule, you should aim to have enough cover to pay all large debts and provide your family or other dependants with a lump sum that can be invested to earn an income to replace your lost earnings.
Total and permanent disablement (TPD) cover pays a lump sum should you become totally and permanently disabled through illness or injury. Becoming totally or permanently disabled can be a financial burden. It can prevent you from earning an income at a time when you have additional expenses to cover such as medical and/or rehabilitation costs. Your family also suffers from your disablement both financially and emotionally. TPD benefits help ease the financial concerns experienced at this difficult time.
Trauma or crisis cover provides a lump sum payment to help people recover from a traumatic event such as a heart attack, cancer or stroke. This lump sum can be used to ease financial stress during a period of recuperation, where items such as home modifications and specialist medical attention may be incurred.
Many superannuation funds will provide you with the option of purchasing insurance through the fund. You can potentially benefit from tax deductions and cheaper costs when you hold insurance within a superannuation fund. There is, however, often a wider choice of insurance cover available outside of your superannuation fund.
It’s important to understand your cover as it may help you avoid any complications if you or your estate need to make a claim. You should read and understand the product disclosure statement along with the entire policy document. If there’s something you are unsure about, ask your financial adviser to clarify it for you.
You should ensure your cover is adequate and that you are not over, or under, insured. The kind of life insurance that you need depends on a number of factors such as your:
Your financial adviser can help you select the most appropriate life insurance option and provider, and can review your insurance cover regularly to make sure it remains appropriate to your ongoing needs. Please contact Alana Lesan on (08) 8139 1150 or firstname.lastname@example.org if you would like to arrange a free no obligation meeting to discuss.
EMFS is a corporate representative of Edwards Marshall Advisory Pty Ltd (EMA), ABN 18 600 878 555, AFSL 479792. Edwards Marshall Advisory Pty Ltd holds the licence to provide financial planning services and product advice. EMFS has four individual authorised representatives of Edwards Marshall Advisory Pty Ltd. They are James Scott-Young, Alana Lesan, Grant Edwards and Steven Wild.