Changes to your insurance needs at any given time are a constant throughout your life. What you need as a single 20-something building your career is generally quite different from your requirements in your 40s when you may be juggling a young family and a mortgage. Then as you approach retirement and beyond, perhaps with your mortgage paid off, your needs change yet again. Whatever your circumstances, it’s always a good time to consider whether your current policies work for you

What’s covered?

Life insurance is the umbrella term for four main types of cover – death, total and permanent disability (TPD), income protection, and trauma.

Death cover is self-explanatory. It pays a lump sum to your estate or nominated beneficiaries when you die. It is often packaged with TPD which covers things like living expenses, repayment of debt, and medical costs if you are no longer able to work. If your TPD is held through your super fund, generally, this will only be paid if you cannot work in ‘any’ occupation; if it is held outside super, you may be covered if you can no longer work in your ‘own’ occupation.

Income protection cover will pay part of your lost income for a pre-determined time if you get sick or are injured and need time off work. It is particularly useful if you are self-employed or a small business owner as you don’t have access to sick leave.

Trauma cover meanwhile provides a lump sum amount if you are diagnosed with a major illness or serious injury such as cancer, a heart condition, stroke, or head injury. Such payments can be a big help with paying medical bills.

Check your super

Death and TPD insurance can often be purchased through your super fund. If, however, you took advantage of the early release of super allowed during the pandemic in 2020, it could be that you no longer have sufficient savings in your fund to cover the premium payments. Or, if you’ve not made any contributions to your super for 16 months, your account may have been deemed inactive under super law and closed.

It’s important to note that if you lost your job due to COVID-19, then any automatic cover in your super with your previous employer may have stopped. If you have a new employer, the cost may have increased. Also, keep in mind that income protection insurance doesn’t cover you if you have lost your job due to a business closure or other COVID-related event.

Protect your mental health

One area that has received more attention during the pandemic is mental health. Not all insurance policies provide cover for mental health without exclusions or additional premiums. Nevertheless, according to the Financial Services Council, insurers paid out $1.47 billion in mental health claims in 2020.

If your circumstances have changed, then it may be worth examining whether your life insurance cover still suits your needs and whether there are ways you can save money through lower premiums. For instance, you might reduce the amount you are insured for or remove some of the benefits.

 

General Advice Disclaimer:

This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.