Protecting your lifestyle and loved ones with insurance

Life Insurance today is responsive to modern trends and competitively priced, and consumers have more choice than ever before. Insurance companies have learnt they need to keep their products and features relevant and affordable, so they can work to protect the things in life you love. Yet Australians are still underinsured with a Term Life Insurance gap in excess of $1,300 billion. And while 70% of people hold car insurance, only 38% of people hold any kind of life insurance. One of the main reasons why people either don't insure themselves, or fail to maintain their insurance is the misconception that insurance is too expensive. Yet in many cases life insurance costs less than the price of a take-away coffee a day! In fact, the annual cost of insuring a $40,000 Holden Commodore in Sydney for a 40 year-old male is approximately $1250 with one of Australia's leading general insurers. And the annual cost of $500,000 life insurance for that same 40 year-old male (non-smoker) with Asteron is only $448.05.

Insuring your most important asset … your life

While you may think that your house, car or investments are your most valuable assets, if you have debts or dependants (and especially if you have both) your ability to produce an income is the most important 'asset' you and your family will ever 'own'. And because your life - that is, your ability to produce an income - fuels the lifestyle that you and your family enjoy now and in the future, your potential death or disablement can have a grave financial impact on your family.

What types of life insurance products are available to protect your lifestyle and your loved ones?

A life or death situation

Life insurance pays a lump sum upon your death. And while many people have some life (death) cover through their compulsory superannuation, this is often not enough to provide for your family in the event of your untimely death. This is especially so if there are debts, such as a mortgage, which must be extinguished, funds that are needed for children’s schooling and a standard of living that you don't want your family to forgo. Rice Warner Actuaries estimates that the life insurance cover held by those with insurance through their superannuation represents only 20% of the cover actually required.

A traumatic experience

A serious illness, such as cancer, or injury, such as caused by a car accident, can have a similar, if not greater, financial impact on a family than a death. Not only do everyday household expenses continue but there are also new expenses associated with the condition. While you and your family may be trying to cope with your illness or injury, and your loss of income, you may also have increased medical and carers expenses. Trauma insurance - or Recovery insurance - pays a lump sum on the diagnosis or occurrence of one of a list of specified serious medical conditions and procedures.

The disability gap - protecting your lifestyle

Income protection, or disability insurance, provides you with a monthly payment while you are unable to produce an income as a result of illness or injury. Income protection is designed to be used in conjunction with lump sum insurance products. Many self-employed people see income protection as an insurance product for families - people with dependants - however income protection is a single person's product too. It is the only product available specifically designed to ensure you can maintain the lifestyle you enjoy, even when ill or injured and unable to work for a period of time. Single people need to understand that if they are unable to work and their income depletes, then the things that they previously enjoyed such as dinners out with friends, holidays, and other luxuries are the first things to disappear. Far from scare-mongering, these days insurance providers, like Asteron, work with advisers and their clients to think about those 'what ifs' in life, and to understand the financial impact they can have on the lives of you and your loved ones. And while we'd love to be able to actually prevent misfortune from occurring, the next best thing we can offer is minimising the financial impact a tragedy has on your life. Which is why getting a number of life insurance quotes can help.

Trauma and income protection insurance - a case study

Ross Petersen, accountant, husband and new father

I have been an accountant for more than 10 years, and have always been aware of the value of life insurance. But, it wasn’t until I started my own business that I went and saw a financial planner colleague who recommended I take out life insurance for the first time. I didn’t realise it at the time, but this would end up being one of the best financial decisions I would ever make.

My planner recommended that I take out insurance including Trauma and Income Protection to ensure that my wife and I were not put under financial pressure if I were to suffer an illness or injury.

One year later, just as my business was really taking off, and I was extremely busy with work, I was diagnosed with throat cancer. This was a huge shock to my wife and I, especially as I was told I had to undergo immediate surgery and then commence chemotherapy treatment.

Shortly after the insurance company received my paperwork, I received a call from the claims area to say that my Trauma benefit of $300,000 and my monthly Income Protection benefit would be paid immediately .

I used the Trauma benefit to pay for the treatment costs, and we could then afford for my wife to take time off work to be with me. The Income Protection benefit covered our day to day living expenses, including the mortgage and other essential bills.

Most importantly, though, it meant I wasn’t forced to return to work while I was still recovering. My planner was instrumental in ensuring my family was covered appropriately if anything were to happen to me. When I was contacted by my insurance company, I immediately rang him to share the great news that my claim would be paid … and that we’d just found out my wife was expecting our first child!

I finished my chemotherapy treatment just after our daughter Emily was born. I’m not out of the woods yet, but my cancer is in remission, so I am staying positive and looking forward to seeing Emily grow up.

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August 2008