Today, we want to provide you with a quick guide to ensuring your life insurance policy is as strong as possible. Of course, many of us will have some sort of insurance, but not reviewing your life insurance regularly can be detrimental. Some of us probably took out a policy years ago without carefully reviewing it. If this is the case, there is a chance the benefit amount won’t be enough, especially with recent inflation. Over the years, our lives will encounter several significant changes. From changing employment and receiving promotions to having children or buying a new home, there is so much that will shift our financial responsibilities. Every time we encounter a significant change, our insurance policies will need a brief reassessment to ensure they align with our financial needs. If you have a life insurance policy that you haven’t even thought about in a while, this article is definitely worth a read.
What We Should Consider When Choosing Our Life Insurance Coverage
The process of choosing or reviewing a life insurance policy isn’t always straightforward. Before deciding on a benefit amount that will meet the needs of you and your loved ones, there are several variables to consider. If you want your life insurance policy to properly support your family’s ongoing financial needs, this is what you need to consider:
Income: Of course, it should always start with your income. After all, the loss of an income can put significant strain on a family. A good life insurance policy should be designed to cover several years of your income, enabling them to adjust without feeling financial pressure. When assessing this situation, you should also consider how your salary is likely to increase over the years, along with any loss due to superannuation contributions.
Future Education Costs: If you have children, you will want them to thrive in their learning journey. Education is a long-term expense that ranges from school uniforms and computers to extracurricular activities and university tuition. Taking some time to estimate these costs will provide immeasurable support to your children, enabling them to follow their dreams.
Mortgage Payments: Our homes are one of the most significant financial, physical, and emotional investments we will ever encounter. In the event of our passing, we should do what we can to ensure our family can continue to live there without any financial pressure. It is essential to ensure your life insurance policy will cover any outstanding mortgage payments.
Funeral Costs: Though this is something nobody wants to think about, it is worth considering. Funerals are often incredibly costly, putting our loved ones under tremendous strain during one of the most difficult times of their lives. Part of a well-planned life insurance benefit should undoubtedly be designated to cover these costs.
Daily Living: This is something that might take a while to go over, but it will provide you with tremendous peace of mind when you do. It is worth taking a little time to assess all your outgoings, such as groceries, utilities, healthcare, and transportation. It is also worth looking into how these prices have increased over time. Painting an accurate picture of your family’s daily living expenses and future expectations will reassure you that your policy is enough.
Debts: When we start to think about our debts, it can be surprising how much we have. If our life insurance doesn’t cover all of them, it can give our family unexpected surprises. Sometimes, the smallest unpaid debt can pile up and become a significant burden, so ensure everything is clear and in order, and your benefit amount will pay them.
What Else Your Life Insurance Can Achieve
Though life insurance in Australia is often seen as a financial tool for supporting loved ones in the event of our passing, it can do so much more. Once we have thoroughly assessed our situation to ensure the death benefit is substantial enough, it is worth considering add-ons and inclusions that can provide us with immense financial security while saving us a significant amount in premiums.
Understanding Add-Ons and Inclusions
Add-ons and inclusions are designed to enhance our life insurance policy further while saving us money on our overall premiums. If you haven’t already, here are some worth adding to your policy:
TPD: Total and Permanent Disability insurance offers a significant lump sum if you are permanently unable to work due to an accident or illness. Seeing as we never know what the future holds, this is a brilliant financial tool.
Trauma/Critical Illness: This insurance policy add-on can give you financial support if you are ever diagnosed with a terminal illness or in the event of other serious medical diagnoses, such as heart attacks or strokes.
Income Protection: This add-on can cover up to 70% of your monthly income for two or more years if you are ever unable to work due to an illness or accident, allowing you to focus on recovery without worrying about money.
How Often Should We Review Our Life Insurance Policy?
Keeping on top of our life insurance policy is a vital aspect of proper financial planning. There are no strict rules when it comes to how often we should review our policy, but the more often we do it, the better. Additionally, whenever you encounter a significant life event, it is essential to assess your policy. This can include a marriage or divorce, the birth or adoption of a child, a promotion at work, buying or selling property, starting a business, receiving an inheritance, or any changes to your health or occupation.
There You Have It
Though life insurance is something that many of us don’t take the time to assess and review, doing so can provide incredible benefits. From covering up to 70% of our monthly income if we are unable to work to funding our children’s education costs, life insurance in Australia is an essential financial planning tool. When we carefully review these incredible policies, we will experience unbeatable peace of mind.
