Covering life’s stages
At different stages of life you may want to adjust your personal insurance needs to protect your lifestyle and your ﬁnancial security.
Life insurance is more than just a lump sum payment to your family upon your death. Under the umbrella of life insurance, there are a number of insurance policies that have been designed to protect you and your family, regardless of your stage in life.
Some ﬁnancial institutions offer an insurance package that may include life insurance, income protection, total and permanent disability insurance, trauma insurance and business insurance. Packages are tailored to suit various ages and ﬁnancial needs.
Each type of policy covers different risks. Below are some examples of typical life insurance policies and their purpose. Make sure you always check the detail of your policy to ﬁnd out what you are covered for and discuss it with your ﬁnancial adviser.
Life insurance helps protect you and your family against the ﬁnancial consequences of death or terminal illness, with a tax-free lump sum.
Income protection helps protect you against the ﬁnancial consequences of a temporary or permanent loss of income due to illness or injury, with regular payments of up to 80 per cent of your current income.
Trauma insurance helps protect you against the ﬁnancial consequences of a major illness, with a lump sum to assist with major expenses and maintaining your family’s lifestyle while you recover.
Total and permanent disability insurance
Total and permanent disability insurance helps protect you against the ﬁnancial consequences of being total and permanently disabled and unable to ever work again.
Business insurance helps protect your business against the ﬁnancial consequences of a business owner or key employee becoming injured or dying. It provides money to cover lost revenue, and business expenses, and allows for a smooth change in business ownership.
Another way to think about what type of life insurance may be appropriate for you is to think about your stage of life.
Young and independent
When you’re young, you are more likely to enjoy leisure activities that involve a high level of risk, such as snowboarding or rock climbing. At the same time, at the start of your career you are less likely to have assets to draw on if you are temporarily unable to work because of an illness.
This is the time when you and your family may be stretched ﬁnancially, from school fees to the cost of your ﬁrst home. Your family may also be relying on a single income. It’s important to think about what would happen if the family breadwinner became ill or injured and was unable to work.
Cost pressures may ease as you get older but won’t disappear completely. Also, while you may be approaching your peak earning years, you may still have to fund your children’s education. Protecting your health and income may be especially important to you during this life stage.
As you approach retirement, you may have paid off your home loan and built up other assets, such as superannuation. However, you still need a safety net for you and your family. If you or your partner suffers a serious illness or dies, insurance may help you avoid the risk of having to sell your home and other assets.