Life insurance is one of those things that everyone needs but no one wants to talk about. The bottom line is that if you have responsibilities - spouse, kids and/or debts - then you need some form of life insurance.
There are two forms of life insurance - one pays out on your death, the other pays out in the event you suffer a critical illness of some kind to help you keep your "Life" together. The second one is often called Critical Illness cover or Trauma Insurance.
Life Insurance - How does it work?
Life insurance will pay out a lump sum amount of cash to either:
You - in the event you are diagnosed with a terminal illness
Your estate - in the event you die without nominating a beneficiary
Your super fund - in the event the insurance policy is owned by your super fund
Or your nominated beneficiary/s - in the event you have nominated a beneficiary on your policy
You can typically pay your premiums monthly or annually and often premiums can be paid either directly or paid by your super fund. There are pro's and con's of having insurance inside your super and largely the reason for insurance in super should come down to your estate planning objectives.
This kind of life insurance invariably attracts a lower premium than Trauma cover or income protection.
How does Trauma Insurance/Critical Illness Cover work?
This pays a lump sum amount of cash directly to you in the event you are diagnosed with a critical illness as defined by your policy. The big benefits of this type of life insurance are:
The benefit is paid directly to you
It is not dependant on you being able to work or not - so you can still be working and have a successful claim for 100% of the benefit
You do not have to have a terminal illness to get the full benefit - in fact most of the conditions that lead to a Trauma Insurance payout result in a full medical recovery.
You can spend the money however you like - medical expenses, mortgage, supplement income, invest it, you name it!
Why have Life and Trauma / Critical Illness Insurance
The easiest way to answer this question for yourself is to consider these Australian facts:
In 2012, there were 49,692 premature deaths*
There were approximately 25,000 potentially avoidable deaths*
27,500 of these premature deaths were people under the age of 65*
And, what about these Australian statistics... EVERY YEAR...
48,180 people suffer a coronary event - half of these are fatal*
80,300 people are diagnosed with cancer*
17,155 people will undergo coronary artery by-pass surgery*
19,345 people will undergo coronary artery angioplasty procedures*
12,410 people under the age of 65 will have their first stroke*
If you have a spouse, kids, and/or debt, you need to be financially prepared. We can help you put a plan into place that is designed to protect what you have.
* Source: MLC Life Research "Life Expectancy & Health Statistics" 2014
Financial Planning Qld is a financial planning firm based in Brisbane, Queensland. We offer a full range of financial planning services and our advice is always underpinned by our Corporate Values. Click here to read more!