What is life insurance?
Life insurance provides the financial means to preserve your way of life, or that of your family, in the event of an accident, serious illness or death.
We don’t like to think about ‘worst case scenarios’ but taking some time to consider the risks and having a contingency plan is like carrying an umbrella – it can’t stop the rain but can provide much needed financial protection during life’s storms.
The family benefits
Even though it’s your life that you’re insuring, it’s not you who will receive any benefit.
And if you die, it’s your financial dependants that could be left with insurmountable expenses.
There may be a mortgage on the house they’re living in, a loan on an investment property, a decade of school fees, and that’s on top of funeral costs.
Make decisions together
You should involve your family in the decision making process about your life insurance. After all, they will be the ones who will need to survive on any benefit received.
When deciding how much life cover you want, think about:
- All your debts
- Your children’s future childcare and education costs
- How much income your family will need to live comfortably
Life cover is ‘guaranteed renewable’, meaning it will generally only stop if you stop paying for it.
It will continue even if you suffer an illness or injury, which would otherwise prevent you from taking out life cover.
It’s important to remember that the higher the level of cover, the higher your premiums will be.
Ask yourself how long you want to hold your life insurance for, and make sure you can afford to pay the premiums over time, especially if your premiums rise each year.
Consider whether your family could sell your home and move somewhere else or downsize to raise money to pay off your debts or mortgage.
Life insurance cover can be paid from your superannuation fund and this can be a more tax effective strategy than holding it in your own name.
Contact First Financial for recommendations on insurances appropriate to your circumstances and the financial needs of your dependants.