We’re onto step 3 (of 10 steps) in becoming financially well organised. Step 3 deals with Risk Planning – answering the question: If you were to pass away, would your family’s financial security be assured?

Last week we spoke about general and personal insurance. This week we’ll focus on term life insurance and total & permanent disablement.

Term Life Insurance

A term life insurance policy will provide a lump sum payout if you pass away.
When determining how much insurance you need, you should consider:

Once you are clear on what you want to happen to ensure your family is financially secure, it’s a matter of working backwards to determine how much insurance you need. There is no simple formula as everyone’s situation is different.

The next question you need to ask yourself is, “Who should own the policy?”

There are generally two options for policy ownership:

  1. Within superannuation
  2. Outside superannuation

There are two main benefits of owning the policy within the superannuation environment:

 

Total & Permanent Disablement

This type of personal insurance covers you if can no longer work and depending on your policy terms, could either be any occupation or your own occupation.

The proceeds are paid out as a lump sum. A review of TPD policy definitions needs to be undertaken to ensure the policy payout definitions match your expectations and circumstances.

For example, if you can no longer work in your chosen career, but can still work in another job, the policy definition may not trigger the payout of the policy.

Therefore some of the issues that need to be considered include:

There are some other traps to be careful of with TPD, when the policy is owned within a superannuation fund:

For more pointers on Risk Planning, join us next week when we’ll wrap up Risk Planning with Critical Illness Insurance, Income Protection Insurance and Health Insurance.

We can assist you with all aspects of Risk Planning, feel free to call us on 07 3833 3999  for more information.