Life Insurance

There are only two things you can’t avoid in life- death, and taxes. However, there are numerous steps we can take to ensure that when we pass, or are severely disabled, we do not leave our loved ones with undue financial burdens.

ACTIVITY

There are only two things you can’t avoid in life- death, and taxes. However, there are numerous steps we can take to ensure that when we pass, or are severely disabled, we do not leave our loved ones with undue financial burdens, due to diminished earning capacity or loss of income.

Types of Life Insurance

Whole of life Policy remains active during the entire lifetime of the person, provided the policy is paid as specified in the policy.  This type of policy also builds a small savings element - called the cash value.
Endowment
Provides a benefit if death occurs during the term of the policy. If the insured is still alive at the end of the term of the policy, it then provides a more substantial cash value.
Term Life
Provides a payable benefit only if the insured person dies during a specified period


Some of the needs usually related to life insurance are:

  • Provisions for death-related costs, medical, hospital, legal and funeral bills, as well as debts like home mortgage and car finance
  • Income/ supplementary for retirement
  • Education for children
  • Funds for long-term plan, such as overseas travel, long-service leave or retirement
  • Income in the event of an accident, illness or disability in order to pay related medical expenses, mortgage payments, and schooling


Consider the situation of Susan, who is married with young children and has a mortgage of $200,000.  At the very least, Stella is going to want to make sure that the mortgage is repaid and there is enough money for the surviving spouse to meet day-to-day living expenses, as well as other costs such as school fees.

Contrast this with David, a 20-year-old living at home, with no dependants and no debts.  David may not find income protection insurance as high a priority as Susan.

However, this type of insurance would be of considerable benefit to Stella with a mortgage and children.

It is the responsibility of each individual to decide how much life cover they should have. It should not be a question of ‘do I need life insurance?’ but ‘how much life insurance do I need?’


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