When you’re already inundated with bills and expenses, taking out life insurance might seem like an unnecessary luxury. But there is a way you may be able to give your family vital protection without dipping into the household budget, and that’s by taking advantage of insurance through superannuation.

If you’re an employee, you probably have some automatic death and total and permanent disability (TPD) cover in your superannuation already. The benefit of this arrangement is that it allows you to use your pre-tax income (e.g. your employer’s Superannuation Guarantee contributions) to pay your premiums. It’s also easy, as your insurance premiums can just be deducted from your super, rather than having to come out of your household budget.

The problem with having this automatic protection is that it can lull people into a false sense of security. The insurance that is provided by employers is generally a minimum level of cover based on your age and/or income. It doesn’t take into account things like your debts levels and dependents – which are two of the main reasons this cover is required.

Do you need to increase your level of cover?

If you have a mortgage and/or dependent children, you may need to increase your level of death and TPD cover in super to clear your debts and provide an adequate level of ongoing income for your family.

There are also types of insurance that generally are not available in super, or may not be provided automatically, so relying solely on cover inside super could mean you’re missing out on the important protection those policies provide.

Trauma insurance is one type of cover not generally available inside super. It is designed to pay you a benefit if you are diagnosed with a serious illness like cancer – with the money often used to pay out-of-pocket medical expenses and possibly help a spouse take time off work to provide care.

Income protection is another common example. This is a type of policy that typically replaces up to 75% of your income if you can’t work due to sickness or injury. And while some employers offer income protection (or ‘group salary continuance’ insurance) to their employees in super, it often isn’t provided automatically.

Lighthouse Consultants
www.infocus.com.au
admin@sabfinancial.com.au
07 3229 9662