And so I came out of my visit from my doctor feeling quite relieved. The scary word that was dangled about was most assuredly ruled out. I am generally OK. But this is not about my condition. This is about the people I most care about in my life. It is about protecting them.
A couple of years ago, soon after we purchased our new home, the hubby and I decided to get serious with our insurance. In Australia, anyone who is employed gets automatic insurance within their superannuation. But the sum insured is, let's be honest, quite paltry. A financial adviser gave us free advise - we should get cover that will pay off the mortgage and some.
1) Life Insurance and Total Permanent Disability, uncovered
The rule of thumb in determining one's insurance is the size of one's mortgage times two. The magic figure for us is $1M. Yes, make your spouse a millionaire! And why not? Let me explain why. The money must be enough to pay off your mortgage, and give your spouse the ability to choose to stop working for as long as required to grieve, support the children, and deal with your departure. Imagine how life changing that will be! I can't even begin to imagine the pain and loneliness ...
But the premium payments for a $1M insurance is hefty, I hear you groan. Well, I have good news for you. You don't even get to see your premium payments if you take insurance within your superannuation! Yes, all you have to do is increase your cover within your super. Not only will you get a cheaper premium (your employer will normally have pre-arranged volume discounts), you never even get to see your repayments (fees) as these are all deducted from the cash component of your super assets. Hah, you even pay with your before tax income (the 9% employer guarantee is taxed less). Oh, you ask, wouldn't that reduce my super asset base? Of course it will. But let's be honest. Or let me be honest. My super balance is quite pathetic. Not only did I start my working life in Australia very late (I lost 10 years of my working life, having migrated when I was already 30 years old), but the global financial crisis almost halved whatever small amount I have. Truthfully, I do not look at my super as my nest egg. After all, the government can change super laws any time. You will be better off using other investing vehicles such as shares and property. (Which is by the way, another blog.)
So, my life insurance is now $1M within my superannuation. My insurance provider only asked me to provide a more exhaustive medical report to assure them that I do not fall off the perch anytime soon. Next important is Total and Permanent Disability. TPD means that you get very sick, and your disability is permanent that it is unlikely that you will be able to go back to work. So insure for a similar amount - $1M. After all, your spouse could become your full-time carer for a certain period. You need to have income flowing in.
Life and TPD ... increasing your cover is easy but requires some documentation and follow-up. If you care, you will breeze through these ...
2) Income Protection Insurance
This type of protection is for temporary sickness. It does not cover the event of losing one's job unfortunately. The product disclosures are daunting. Nevertheless, read it. Place it on your bedside table ... there's no excuse for negligence! Once again, get income protection within super. Premiums are lower and you don't contribute a cent of your after-tax income.
There are waiting periods of 30, 60 and 90 days. If you have some savings, then you may opt for either 60 or 90 days. Insurance payment periods are generally 2 years, 5 years or to age 65. If you can afford it, aim for 5 years or to age 65. I don't believe there is such a thing as too much insurance.
So there you are, dear friends. I hope I have empowered you to act NOW. Or it will be too late ...
One important postscript. You need to update your superannuation beneficiaries every three years. A lot of people either miss this or are not aware that beneficiaries become nil until you advise your super provider otherwise every three years! Do yourself a favour, login to your super account and make sure that your list of beneficiaries is up to date and listed correctly!
One important postscript. You need to update your superannuation beneficiaries every three years. A lot of people either miss this or are not aware that beneficiaries become nil until you advise your super provider otherwise every three years! Do yourself a favour, login to your super account and make sure that your list of beneficiaries is up to date and listed correctly!
Next blog ... Making a will is essential!
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