The purpose of personal risk insurance is to maintain your lifestyle and financial prosperity when something goes wrong. There are several types of health risks that you should consider but there is only one outcome that is important. That is, to have the right amount of money delivered to the right person at just the right time it’s needed.
You already know that things go wrong in life, so ask yourself these questions:
- “If I die before my time, where would the money come from to keep the house, pay the bills, as well as raise and educate my children?”
- “If I had a serious accident and could never work again, could I / we get by for the rest of our lives with added costs of rehabilitation?”
- “If I developed cancer, could we afford the one or two years of out-of-hospital (out-of-pocket) treatments that most recoveries entail?”
When you arrive at a realistic answer, check your super to see how much insurance you have there. It probably won’t be nearly enough.
According to Canstar, 83% of people sign up for the default cover in their super account. The amount of cover is typically low. Superannuation statistics published by ASFA in December 2016 indicate that average super account balances in 2013-14 year were around $98,500 and $55,000 respectively for males and females.
This means that the average lump sum payout for a death or total & permanent disability insurance claim would be the equivalent of about one or two years of income at best. And it won’t help at all to pay your way through the early years of a serious health trauma such as cancer, heart surgery or stroke.
If you think you can’t afford insurance, consider increasing your insurance in superannuation. The premiums are automatically paid from your super account. Although this will have a slowing effect on your retirement savings, it’s a compromise that can help a lot with the family budget, particularly during the expensive years of home making and child raising.
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