You trust no one but yourself when it comes to providing the security and a comfortable life for your loved ones but what if you are not around or suffering from a critical illness?Would you be happy with the knowledge that your family will be provided and cared for without you? Or do they rely solely on you for what they need to survive? These are some of the questions you need to ask yourself before choosing to take out life insurance. There is no exact answer which insurance provides the maximum protection. Here are some further questions to ask yourself.
- How much cash do you have if you or your spouse meets with any accident?
- What money do you have in shares, savings, existing insurance policies and other investment plans?
- How much paid leave do you have and what type of support can you get from your family?
- Are you entitled to any government benefits or workers compensation?
- How much cash you would like to have?
- Do you have insurance within your superannuation policy?
Answering these simple questions can help you in calculating the amount of insurance cover you are considering. In other words, the difference between what you will have and how much you would like to have is the amount of insurance you should consider. Your lifestyle basically determines insurance cover. For eg: If you have huge mortgage to pay or have responsibilities related to children, you need more cover. On the other hand, If you have separated from you partner and have few obligations then you need less cover.
Deciding insurance cover according to your needs:
- Assistance from a professional advisor can help you in deciding which cover will suit you the most. You may get trapped in the vicious circle of the market trends but your financial expert won’t. Try Insurance Watch and iSelect to get an idea.
- There are plenty of insurance calculators available online. This acts as a useful guide to how much life insurance you should have. Some calculators may require you to fill in a detail questionnaire to give you a close figure to exact amount.
When you have finally decided on the type of insurance cover, it’s time to choose the premium type. Insurance premiums usually increase with age because the older you get, there are more chances of making a claim.
Stepped premium: Stepped premium is a premium which is low in the initial period but tends to increase as you get older. This type of premium is recalculated at each policy renewal.
Level premium: Level premium is a premium calculated on your age at the commencement of your policy and the amount remains the same for the complete term. This is for those people who want to keep aside a set amount as a premium and want to know the amount in advance. It helps you to manage your finances better as you know how much you are to pay upfront. In this type, premiums are higher but they tend to be on the lower side when you are older.
Getting an insurance policy: Life insurance can be taken out by three ways:
- Super fund: It arranges life covers and disability covers for their members. Many working Australians have and prefer super fund with their superannuation.
- Insurance companies: Many financial entities and institutions offer varied types of life insurances.
- Insurance advisors and brokers: you can also buy your insurance policy through financial advisors and brokers.
To choose the perfect life insurance cover, shop around and compare various policies based on the level of cover, value and exclusions. Irrespective of what cover you choose, constant reviewing of your cover is highly recommended.