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Although shopping for life insurance can be a daunting task, it is crucial to select the best type of coverage as part of your family’s financial stability.
If you don’t know where to begin, your trusted financial adviser in Port Macquarie shares these five simple steps that can guide you:
Consider How Much Life Insurance Cover You Need
To calculate how much life cover you may need to apply for, here is a basic list of expenses your family would need to pay:
- the mortgage or ongoing rent,
- credit cards and any other debts,
- residual medical costs if you were ill long-term,
- child care,
- school fees,
- ongoing living expenses,
- your funeral.
Determine the Best Type of Life Insurance for Your Needs
Typically in Australia, you can own life insurance personally or through your superannuation fund.
Your Life Insurance policy can be owned and paid by you personally. There are several advantages to choosing this option. First, you can generally apply for higher levels of cover, which may be necessary with the increased cost of living and higher house prices that Australians are experiencing. Secondly, by owning life insurance outside of super, the proceeds are generally not taxed, whereas they may be taxed if your policy is held through super. This could result in a larger inheritance for your beneficiaries.
However, you need to ensure that you have the available funds to pay for the policy personally which could negatively impact your cash flow.
Most industry and some employer-sponsored corporate superannuation funds will provide you with life cover as a default that requires no or minimal medical underwriting. Paying for insurance through your super fund can also be tax-effective as your employer’s super contributions and salary sacrifice contributions are taxed at 15%. – this is lower than the marginal tax rate for most people.
However, you do run the risk of your life insurance policy lapsing as by law, super funds will cancel insurance on inactive super accounts that haven’t received contributions for at least 16 months. Plus, super funds may have their own rules that require the cancellation of insurance on super accounts where balances are too low. So it is imperative that you monitor your contributions and superannuation balance to keep your cover in-force.
Determine If You Need Any Riders
If you have decided to purchase life insurance, you may consider adding a rider to your policy. A rider is an additional option to your policy to enhance or change its terms. Common riders include:
Return of Premium Rider: If you cancel your policy prior to death, you can receive a portion of your paid premiums.
Waiver of Premium Rider: This rider will waive the cost of premiums if you can no longer work for a specified period.
Accelerated Death Benefit Rider: If you are diagnosed with a terminal illness, this rider will pay out your policy sooner.
Assess Your Budget and Compare Prices Among Insurers
Once you have determined the right type of life insurance for you, it’s time to consider the cost. Select a level of coverage that is right for you and your family, but be sure to keep costs in mind.
Price your options and compare quotes from carriers. It is best to seek advice from a specialist wealth protection financial adviser who can help you determine the best policy for your circumstances,
Decide How You Want to Pay Your Premiums
Once you have settled on the type of life insurance that’s right for you, deciding how you want to pay your premiums is the next big step. Many people choose to pay their premiums monthly, quarterly, or annually. Remember that your life insurance policy will not begin paying a death benefit until you die.
If you pay the premiums annually, you’ll be less likely to have the habit of paying your bills on time, but you may be able to save on the overall costs of your life insurance policy.
Ready to Buy Life Insurance Cover?
Life insurance is a critical part of your financial plan. If you don’t have life insurance, or your coverage is insufficient, you may be at risk of leaving your family with financial hardship if you were to pass on.
Purchasing life insurance is a complex and vital decision, but it can help protect your loved ones. If you haven’t done so already, take the time to learn more about what type of life insurance may be right for you by following the steps outlined above. You can also schedule a consultation with a reputable financial adviser in Port Macquarie.
These steps can help you determine the type of life insurance that’s best for your needs, ultimately saving you money.
If you need financial advice in Port Macquarie or have questions about life insurance, Coastal Advice Port Macquarie can help you. Contact us and speak with one of our trusted financial advisers today!
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DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.