There are many myths about life insurance, so here are some points that you might like to consider.
Myth One: Your life insurance only comes into effect if you pass away
Life insurance products are designed to help you and your family during what can be a difficult time. Different life insurance products are designed to protect you from different events that can occur:
- Life cover – pays a lump sum payment in the event of death or diagnosis of a terminal illness that can help repay debt and cover living costs.
- Total and Permanent Disability (TPD) insurance– pays a lump sum in the event of total and permanent disablement resulting in being unable to work again. TPD insurance can provide a financial safety net to help you and your family, and pay for medical and rehabilitation costs.
- Trauma (or critical illness) insurance- pays a lump sum for major illnesses (for example, cancer, heart attack or stroke) and can help support you and your family if you can no longer work.
- Income protection – pays some of your income if you're unable to work due to sickness or injury.
Myth Two: If you're healthy, you don't need life insurance
It's easy to think you don't need life insurance if you're fit and healthy. But if you are planning, or have recently experienced a big life change, such as buying a house, getting married or having a baby, you should consider what might happen if the unexpected were to occur and how you would maintain your family's lifestyle. It is also worthwhile to keep in mind that if you do experience health issues in the future this may make you ineligible for life insurance cover or attract higher premiums.
Myth Three: If you have private health cover, you don't need life insurance
Private health cover can be a big help if you need to go to hospital or encounter certain health care costs, but it doesn't provide cover for costs such as any rehabilitation you may require, or your mortgage repayments. TPD or income protection could assist in covering these additional expenses, and help preserve your family's financial situation, in the event of an accident or if you suffer a serious illness and are no longer able to work.
Myth Four: The built-in life insurance in your superannuation policy is all you need
Many super funds offer some life insurance for their members. It is important to find out what type of cover you have in your super fund and whether it will be enough to cover all your expenses. If you find you do not have enough cover, you could consider standalone life, income protection, TPD or trauma insurance to cover the gap.
Read about how income protection can benefit your financial future should the unexpected happen.
