What Insurance Do You Need?

If you do need to take out life insurance, you need to make sure get the appropriate level of cover. Insurance brokers can assist to find you the best policy for your financial circumstances from a range of insurers. You may to consider your lifestyle, the age of your children, schooling expenses, mortgages, business overdrafts, and any other loans or debts. If both partners have significant incomes, you may each like to consider taking out life insurance. After all, if you need two incomes to maintain your lifestyle now, that is unlikely to change in the foreseeable future.

You may want to consider a ‘whole of life’ policy, which has a savings or investment component as well as insurance cover, and is a commitment for an agreed term, which could be for life. The policy is paid out on your death. An ‘endowment’ policy is different in that it is paid out when you reach a certain age. The following applies to both policies. From your annual premium, your insurer deducts its expenses, such as commissions and salaries, and invests the balance for the purpose of earning interest that increases the value of the policy. If you cancel a policy before it reaches maturity, you may incur a cost that can reduce the benefit of any savings associated with the policy.

You may decide to take ‘term’ insurance, which covers you one year at a time, and can assist you, when you have large financial commitments, such as in the early stages of your mortgage. Term insurance is usually cheaper than ‘whole of life’ insurance, and is more flexible, but because there is no savings component, your family only receives the insurance payout, in the event of your death. The premium usually increases with your age.

It is not common knowledge that your most important financial asset is your income. Insurance companies offer policies designed to protect your income in the event of accident or illness. This is especially important for the self-employed. If you are injured or become ill, you may be entitled to some social security payments, but these are usually much less than your normal pay, and there may be some delay before payments begin. If you are entitled to workers’ compensation, there may be lengthy delays, and you may not receive the amount you were hoping for.

Sick leave only covers a few weeks for each year, and it may not apply in all circumstances, for example, if you have to take time off work to care for a sick child. Accidents or a serious illness, such as cancer, can leave you unable to work for a protracted period. This is why you should consider taking out income protection insurance, either as a separate policy or as part of your life insurance.

For more information on insurance go to http://www.creditworldaustralia.com.

Summary

• If you have financial dependents you may decide you need to take out life insurance.
• Speak to your insurance broker about a range of life insurance options.
• ‘Whole of life’ and ‘endowment’ policies add a savings or investment component to the life insurance policy. The former is paid out at the time of your death, the latter when you reach a certain age.
• Term insurance is a more flexible option, designed for when you have large financial commitment.
• You may want to take out income protection insurance, in the event of you being off work for a protracted period, due to accident, illness or family circumstances.
  

Article correct at its author date: Jan 2007. Copyright Virtual Office Space, Any unauthorised reproduction of this article will be prosecuted to the full extent of the law. Credit Cards Australia.

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