Personal Risk Insurance, what’s right for you?

When implementing personal risk insurance, there’s a lot to consider. How much cover is enough? What does it cost? And, when’s the best time to get insurance cover.

Here we overview four of the more common queries about personal risk insurance.

1. How much is ‘enough’ insurance cover?

Deciding the value of a life insurance policy requires careful consideration. Typically, the claim amount needs to be sufficient to pay for day-to-day living expenses and capable of funding longer term requirements and obligations that might include:

  • Paying your mortgage and/or other debts
  • Ability to pay medical bills and funeral expenses for the deceased
  • Providing income for remaining family members for day to day living expenses including commitments such as education for children
  • Full or partial financial support for a spouse throughout their life including retirement

2. Insurance and Super

Your life insurance can be held inside your superannuation fund. On the positive side, your premium will be paid from your superannuation fund which provides some day to day cashflow relief.

However, these payments will reduce your super balance which may affect you at retirement.

It is also possible for employees to take up ‘group’ insurance through their employer’s superannuation fund.

While this can be convenient, it may not be a competitive option. That is, premiums may be higher while policy benefits can be less or not appropriate for individual circumstances.

It is also important to understand some conditions may be specific to group cover. These might include cancellation of your policy should your employment circumstances change or reduced entitlements upon making a claim. A tailored policy held outside the super fund may be more suitable.

3. When is the best time to implement personal risk insurance?

The short answer is now. The earlier you arrange personal risk insurance the better.

Firstly, the younger you are when you take out insurance policies will likely meant there’s more chance you’ll be in good health and that can help avoid higher premiums or pre-existing health exclusions. Once insurance policies are in place with your insurer, it can often mean they are guaranteed renewable, regardless of the health matters that may affect you later.

Secondly, arranging your policies when you are younger may mean that opting for a ‘level’ premium policy could be a cost effective long term option compared to the more usual ‘stepped’ premium policies. This can have a significant impact over the life of the policy.  However, there are a raft of terms and conditions that may apply, so before making decisions seek advice as this will help you to determine the most appropriate risk insurance options for your individual circumstances.

4. Review your insurance – regularly!
As a rule of thumb, when changes occur let your financial adviser know.  Marriage, divorce and the birth of a new family member should all be factored into your insurance strategy. Matters such as binding death nominations need to be reviewed regularly and updated as necessary in accordance with your will and estate plan should you pass away.

To learn more about personal risk insurance and tailoring a strategy that’s right for you, please give us a call.

This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

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