How to know if it’s time to review your insurance cover

Silhouette of Couple looking in to the distance as part of a jigsaw

It’s the last thing you think of until you need it the most, but signing up for adequate insurance is one of the most important steps you may ever take to carry you, and your dependants (if you have them), through the uncertain future. Take our test to find out if you’re protected.

1. Do you have enough life insurance?

Advocates say you should insure yourself for 10 times your salary – you need enough life cover to handle debts and education costs; to pay for all the various things your dependants will require; and to provide an income stream.

2. Do you have the right cover?

If cash flow is a problem, consider boosting your insurance cover inside superannuation where premiums come from your accumulated retirement savings or employer contributions. Your super fund is required by law to give you coverage, but the average life cover is just under $190,000. If your nominated loved ones are not tax dependants (such as a spouse or a child under 18), they may incur taxes on any payout.

3. Do you have Total and Permanent Disability (TPD) cover?

Could you and your family cope if you were incapacitated and couldn’t work? Remember to bear in mind the cost of any home modifications needed or payment for ongoing treatment.

4. Have you nominated your dependants?

If you take life cover inside your super, consider making binding death nominations to ensure your intended recipient gets the payout. Remember, these have to be updated every three years. If they aren’t, the trustees of your fund can exercise their discretion in deciding who gets your money. And no one wants that.

5. Does your life insurance policy have a terminal illness clause?

Many policies will pay out early if you are diagnosed with a terminal illness and less than 12 months to live. Payouts can vary from the entire amount made upon death, to a pre-determined limit. Not all policies offer this benefit, including some insurance cover provided via super.

6. Is your income protected?

Income protection policies usually cover you for 75 per cent of what you earn, either for two or five-year periods, or up to age 60 or 65. The suggested monthly payout for someone earning $55,000 a year is $3500.

7. Do you have a disaster fund?

This is to cover you for any period before insurance pays out. Six months of salary is a good figure to have set aside in a disaster fund. Applications for income protection can take more than half a year to process. Accessing insurance in superannuation can also take that much time. Covering yourself to bridge such a gap may be wise.

8. Is your home adequately insured?

If you own your home, make sure you have enough cover for it.
Insurers’ websites offer calculators to determine rebuilding costs, including interim accommodation, rubbish removal and inspections, but their estimates can vary, so use one of those that asks for the most detail.

9. Are your contents covered?

Even if you don’t own your home, you need to cover everything inside it – which may be worth more than you think. Policies can offer different options, such as the ability to insure individual items while travelling overseas and new-for-old replacement. Also, check you have liability coverage for incidents that may occur inside and outside your home.

10. Is your car comprehensively insured?

Third-party insurance will cover damage to other cars, but not your own. Comprehensive car insurance covers everything.

The verdict:

• 3 NOs = be alert
• 4 NOs = be slightly alarmed
• 5 NOs = it might be a good idea to sit down with your loved ones and review your insurance cover.

You should be doing this every year or at worst every three years to ensure your cover continues to meet your circumstances, financial needs and objectives . Even if you have no children, but do have a home loan, your mortgage is probably not the only legacy you’d like to leave behind.

An article by PENNY PRYOR Smart Investor

So come see us while this is fresh in your mind, and have this important discussion, so you can have peace of mind, knowing that you have in place a plan for the future.

Tags: , ,