Grow Magazine

Work out what your life is worth

Don’t just fear illness, do what you can to prevent and prepare for it.

Taking care of your fitness and finances is one of the few ways to take control when misfortune hits, writes Barbara Drury.

When one of Ronnie’s relatives passed away from a heart attack, at only 48 years old, he had no life insurance and the family home had to be sold. That prompted Ronnie into action.

Ronnie decided to take control for his own peace of mind. He took out life insurance with critical illness cover, which provided a lump sum payment to help cover the medical bills and loss of income from his heart attack and recovery.

But he wasn't expecting illness to strike. Ronnie was a fit man in his early 40s, so it was a shock when, without symptoms or signs, he suddenly suffered a heart attack. It hit him “completely out of the blue” and he went into open-heart bypass surgery.

It is clear that the financial support provided by insurance can be really valuable. Aside from doing the best you can to take care of your own health and fitness, insurance is one of the few ways for you to gain some control in the event of misfortune.

Clearly, Ronnie had made a decision that proved most valuable, and suited his eventual needs.  But working out if you need insurance and what level of cover you may need takes a little work.

Essential matters

The most common types of life insurance you should consider are:

  • life cover, which can help pay off debts such as a mortgage and provide for your families ongoing needs if you die or are diagnosed with a terminal illness
  • total and permanent disability cover, which can help extinguish debts, provide for the families ongoing needs, pay for out of pocket  medical expenses  and any required home modifications such  replacing stairs with ramps,  if you can never work again due to an illness or accident
  • income protection, which can help you keep up with bills and household expenses by replacing a percentage of your income if you can’t work due to an illness or accident
  • critical illness or trauma cover, which can help you pay for out of pocket medical expenses, reduce debt or allow your partner to take time off work if you’re diagnosed with a serious medical condition and provide financial support while you recover.  Conditions covered generally are cancer, stroke and heart attack

Each of these insurance policies protects you in different ways, so it’s common for one person to have all four types of cover.

What about the cover you have in super?

Life, total and permanent disability and income protection cover can often be included as part of your super but covers such as trauma are not provided within the super environment. You also need assess the amount of cover you have within super. Is it enough? Generally you are able to apply to increase the level of cover through your super.

When funding insurance this way, you can use your before-tax income (through employer or salary-sacrifice super contributions) to pay for your premiums instead of your after-tax savings.

A good place to start is to see what insurance cover you have inside your super. Once you know what cover you already have you can explore what additional cover you might need.

If you want a hand working out how much cover you need, or weighing up your cover options, you may want to talk to a financial planner.

January 2016