What is Life Insurance?
What is Life Insurance?
There are many different types of Life Insurance, but in simple terms a Life Insurance policy is taken out by an individual who then pays a monthly premium to insure against their death. The Life Insurance policy will provide a lump sum payment in this event allowing the policyholder to sustain financial stability for their nominated beneficiaries.
Why do I need Life Insurance?
For many, Life Insurance is overlooked, disregarded as an additional expense that is not essential or necessary. However, it can be said that your most valuable asset is your ability to earn an income. This ‘asset’ could be providing say $60,000 per year for the next 35 years which equates to over $2 million; doesn’t it make sense to insure this?
Life Insurance is most likely to flag as a consideration as your life develops and you reach stages that make you re-evaluate what is important to you:
- The birth of child – means you now have dependents to consider should anything happen to you.
- You acquire debts/ loans such as mortgage with not enough assets to service these loans or expenses.
- Contributions – you might wish to make a charitable donation when you die.
Although these considerations are likely to occur as you get older if you insure your life when you are young, fit and healthy, your premium will be far cheaper than getting it when you’re older and possibly not in such good health. Your premiums will stay considerably lower throughout your life because you were insured while still young.
If you are still not convinced that Life Insurance is relevant to you then consider this:
- 2 out of 5 people will suffer a critical illness before they reach 65. (General Cologne Life Re Australia 2002)
- 50,000 Australians have heart attacks every year. (Heart Foundation, Australian Facts 2004: Heart, Strokes and Vascular diseases 2004)
- A third of all men and a quarter of all women will be diagnosed with cancer in the first 75 years of life. (Cancer in Australia 2001 – Australian Institute of Health and Welfare and Australasian Association of Cancer Registries 2004)
- 6 out of 10 Australians with dependent children don’t have enough life insurance cover to care for their loved ones for more than a year if they were to die. (Fast Facts – a nation overexposed, Investment and Financial Services Association 2005)
A Life Insurance policy provides the peace of mind that if the worst should happen you are prepared and those you love will be cared for financially. Ultimately this helps you feel more in control, reduces your stress and offers some comfort to your family.
With 89% of us insuring our motor vehicles and only 14% of us with a Life Insurance policy doesn’t it make you question what in our life we value most?
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The content of this guide is of a general nature and does not constitute financial advice. It is provided for general information purposes only and you should seek your own independent, professional advice when considering insurance products.