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Life Insurance Guide 

Before choosing life insurance cover, you need to know in advance what level of cover is right for you. It’s really important to have accurate answers to these key questions before proceeding to choose a policy:

• How many dependents you have, and will have for the foreseeable future
• How much you’re currently spending on them
• How much of your income the family could survive without
• How much debt you have; and
• How much you want to have set aside as a safety net for future events

Answer these questions for yourself, honestly, and get an idea of what you need before you select a policy or speak to a broker. When you know exactly what your obligations are, and what you would need to keep up you can get a clear idea of what sort of premium is acceptable and whether or not you need to set aside savings as well.

You may think that the government will provide for your family should something happen to you, but that’s not the case and your obligations don’t automatically pass on to anyone else. Nor will your superannuation or any other benefit automatically include anything for life insurance.
 

Busting common life insurance myths

Twice my current annual salary is enough cover

When looking at the amount of cover you need, you’re thinking about your family’s long-term needs, and all your debt obligations at the same time. Two years’ salary is barely going to help. Think about the costs associated with your mortgage, running the house and car, medical expenses and the growing future expenses that will need to be paid for out of your cover. Only when you have this all in mind can you understand how much cover you need.
 

Every person needs life insurance

This is not really the case. If you, or you and your spouse, own your own home, have limited credit card debt and loans, are able to support yourselves easily on you current income and have few (or no) dependents, then it might be wiser for you to start an emergency savings fund, or invest in some other way to cover yourselves for a rainy day.
 

Life insurance premiums are deductible

The only time your life insurance premiums are deductible is when you are self-employed and cover also insures the business operations or when insurance is held through a superannuation fund. Contributions to the insurance premium will be tax deductible, but they are also subject to age limits. The limits and amounts change on a regular basis so check with your provider or do a search online to find out what the current limits are.
 

Income protection benefits aren’t really helpful

When you’re thinking about income protection, it’s really for you to decide how long you think it would take you to get back on your feet if something unforeseen happened and you couldn’t work for a long period of time. How long have you previously been between jobs? How long did it take you to recover from any medical procedures or surgery you have had? Think about the experiences of people you know who have experienced problems and how long it took them too. A benefit period of a few years might be appropriate.