Insurance
Background
Whether you are obtaining insurance for the first time or are reviewing your existing cover, it’s important to understand the main types of personal insurance that exist. This area can be complex, and you don’t want to get it wrong by either obtaining too much or not enough.
If you never claim on the insurance, you will think you’ve got too much, but if you do claim, you will most likely think you didn’t get enough.
4 main types of personal insurance exist and you should consider these when protecting your family and yourself:
- Life
- Total and Permanent disability or TPD
- Income Protection or IP
- Trauma or Critical Illness cover
Tips:
- First of all, determine what types you need. Depending on your financial situation, you might not need as much as you think. Older clients with more assets generally speaking may not need as much as they have sufficient to fund themselves in the event of an unfortunate mishap. Younger clients might need more as they have not accumulated as many assets.
- Review your insurance on an annual basis, as your circumstances change you may need to change the cover amounts or types.
- Nowadays it’s easy to check the claims history of the insurance company. You can also check reviews to see how they deal with clients.
Traps:
- If you use a broker or a third party, be cautious on how much they recommend. Don’t forget that in most cases, they get paid a commission and the more you get the more commission they get paid.
- Most insurance providers will offer different bells and whistles that can make the insurance cover expensive. You need to make sure you know what you’re getting. For example, if you have sufficient savings to last you 6 months without working, when calculating the waiting period on the insurance IP cover, go for a longer waiting period. This should reduce the premiums.
- If you decide to fund the insurance through super remember that the conditions under which you can claim may be different to if you got the same type of cover outside of the super.
- If you have cash flow issues and want to save money then the super fund can fund the premiums. However, this will have an impact on your final balance. You can end up paying thousands of dollars over time and never claim, which means you’re healthy.