Life insurance is a key pillar in your personal financial planning, and should not be ignored. Despite the fact that most people should in fact have some form of life insurance, there remains a great deal of confusion and scepticism surrounding the subject.
Outlined below are the key 8 facts that you absolutely must know before purchasing any life insurance:
1. If you have financial dependants, you NEED life insurance
As a simple rule of thumb, if you have financial dependants, whether that be your children or your spouse, you will need some form of life insurance. Calculate your life insurance needs with my free online life insurance calculator here.
2. There are two CATEGORIES or life insurance
There are two categories when it comes to insurance – term and permanent. Term is a far cheaper cover than Permanent but is not always the right answer. Permanent cover includes Whole of Life, Universal and Variable and carries with it an investment component, allowing you to use your cash value to pay for the insurance premiums. Term cover has no investment component, hence the lower price. It’s important that you consider the differences and make an informed decision about which is the right solution for you.
3. The TERM of your insurance policy should match your needs
With Term life insurance, it’s important that the term match your personal insurance needs. This could be through to your planning retirement age or age of financial independence, or when your children are no longer financially dependent on you. Ensure that you are purchasing insurance from a provider that allows you the flexibility of setting your term.
4. Don’t LIE on your application form
If you’re not truthful on your insurance application, you may very well see the insurer deny you coverage, cancel your policy or increase your insurance premiums to continue your coverage. It’s important to tell the truth from the start and ensure that you have the ‘peace of mind’ that comes with the right cover.
5. You should REVIEW your insurance policies regularly
Over time, as your assets grow and your overall financial position and needs change, your insurance needs may very well change also. It’s important to review these with your Adviser on a regular basis and ensure that you have the right level and forms of personal protection in place.
6. Your non-working SPOUSE should also be insured
I’m yet to meet someone who is able (or willing) to put a value on the economic contribution to the household of their non-working spouse. More often than not, they are looking after the children and ensuring that the house is in order. In all likelihood, if something were to happen to your spouse, your lifestyle would change and you may not be able to work the hours you currently are and therefore would require a buffer to make up for the lost income. Always consider insuring your non-working spouse.
7. Your policy can lapse if you forget to pay your PREMIUMS
It’s important that you pay your insurance premiums on time, otherwise your policy may lapse and not be in place when you need it most. Automate your insurance premium payments or set a calendar reminder to ensure that you don’t miss the repayment dates.
8. Your EMPLOYER’S cover is rarely sufficient
Most employer-provided life insurance cover is for 2 – 3 times your annual salary. Very rarely is this sufficient cover for most professional expats. It’s also important to keep in mind that should you change employers, your new employer may not provide you with any cover and implementing new insurance at a later age could be substantially more expensive.
Whether you’re looking to review your insurances held within your super fund, or want to take out new insurance, arrange a meeting with a professional adviser today.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Adviser with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to international and local professionals in Singapore.
Book a complimentary consultation here.