ARE YOU PAYING FOR LIFE INSURANCE YOU DON’T NEED?
If you’re thinking about protection for ‘life’, the first type of cover most people think about is Life Insurance. However this is usually the wrong place to start.
Why? Because Life Insurance only pays out when you die or become terminally ill. And weird as it may sound, dying is cheap. What I mean by that is, when you die your expenses stop and then it doesn’t matter so much anymore! It’s the dependents that are vulnerable following loss of income from someone who provided for the home.
Staying alive on the other hand, costs money. Sometimes, lots of it. How long would you survive if you could no longer work due to an accident or illness? A few weeks? A month or so? What if you couldn’t look after yourself and there were extra costs for care? How about if your partner had to give up work to care for you?
This is why the protection you get from policies like Income Protection, Trauma and TPD insurance are worthy considerations before your Life Insurance policy. They replace your income and help cover costs in the event of accident or illness where you or your partner are unable to work.
Almost everyone should have this type of protection in place because it protects you and your family from the unforeseen. Find out which type of cover is right for you.
How do you know if you really need Life Insurance?
You need Life Insurance if you:
have a partner who depends on your income
have parents or siblings that depend on you for support
pay child maintenance or support for your ex-partner
operate a business with a partner or employ staff
have a loan which is guaranteed by somebody else (like your parents)
have joint loan with somebody else (including a home loan with your partner)
don’t have an Emergency Stash which could pay for your funeral
want to leave an inheritance for someone and you have some debts
- If none of these apply to you, then you almost certainly don’t need Life Insurance.
Sherpa Says: You’re probably paying for Life Insurance and don’t even know it.
That’s because, by default, Super Funds include Life Insurance cover. The premiums are deducted from your Super account which over time, reduce your retirement savings.
Usually, Life Insurance with your Super is an opt-out feature. In other words, if you don’t tell them you don’t want it, you get it. Few people focus on this when they start a new job and are presented with a mountain of forms to sign. As a result, I find that many 20-somethings and 30-somethings discover that they are paying for insurance they don’t need, or just as bad, doesn’t meet their real needs.
Your Super can be a great way to pay for the cover you do need. There are tax advantages which can make it 15% cheaper. Because it doesn’t come out of your day to day spending money, it is also easy on your budget and you can reduce the premium further by paying annually instead of monthly. All up this could save you 25% on your premiums.Find out what cover is right for you and how cost effective it can be. The LifeSherpa Insurance advice service is free and we give you CashBack from the commissions the insurance company pays us.
Vince Scully | LifeSherpa
With over 25 years in Financial Services from consulting to management, Vince Scully is the go-to guy for wealth management and financial advice. Before creating LifeSherpa, Vince founded the Calliva Group; a fund manager, product issuer, adviser and lender. Vince is an adviser to the Wealth Management Industry, and prior to his role as CEO at Calliva, a senior member of Macquarie Bank’s infrastructure team.