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Life Insurance Basics: Key Insights Before Structuring Your Wealth Protection Portfolio

We all know life insurance is important; but it’s often put on the back burner in our lives as family, work and bills take priority. That doesn’t mean it should be ignored and the best thing to do is get advice on how to structure your wealth protection portfolio. Before you do, here is some of the very basics you need to know:


What Insurance should I get?

There are 4 different policies for individuals that you may need to protect yourself. In addition, there are insurances that apply to businesses too, but we will cover that another time. The 4 basic covers are:

  • Life Insurance
  • Income Protection
  • Total and Permanent Disability Insurance
  • Trauma/Critical Illness Insurance

Whether you need all 4 will depend on your personal circumstances, but here is a basic rundown of each:


Life Insurance

What is it? A Lump Sum cover if you pass away or are terminally ill.

Why do you need it? You need it to protect those you leave behind, your partner and/or children likely rely on your income or your unpaid work to provide housing, food, care and a lifestyle. Without you, they are vulnerable and likely unable to support themselves to live the life you had planned for them.

How much do I need? Most people want their family to maintain their existing life without major changes. This means allowing for enough money to pay off debt, cover lifestyle expenses, schooling, funeral costs and any other relevant expenses.

How do I pay for it? You can pay directly out of pocket monthly or annually or you can set up a policy that is funded by your super. Its important to note that if you want to use super that you don’t have to accept your super funds policy. We can set up a direct policy and still fund using super.


Income Protection

What is it? A monthly Income Stream if you can not work due to injury or

Why do you need it? You rely on your income to fund your lifestyle and service your debt, a sudden reduction in that income can have devastating consequences on you and your family’s personal finances. Income Protection ensures you can maintain your lifestyle as well as remain on track to achieve your long term financial objectives.

How much do I need? Generally, you can insure up to 70% of your income plus super contributions, you should discuss with your adviser about a level that is appropriate for you. You can cover your income all the way through to retirement age.

How do I pay for it? You can pay directly out of pocket or you can set up a policy that is funded by your super. Its important to know that Income Protection Premiums are tax deductible so you should make sure your accountant knows about your policy.


TPD Insurance

What is it? A lump sum payment if you are permanently unable to work.

Why do you need it? Permanent incapacity will have a severe impact on your financial position and ultimately your way of life. TPD Insurance allows you to preserve the lifestyle you have built even when you can no longer work.

How much do I need? Your level of cover will depend on your personal circumstances, its important that you consider the impact a permanent disability would have on your life. You need to consider your level of debt, your long term lifestyle costs, medical costs, children’s education and any other relevant expenses.

How do I pay for it? You can pay directly out of pocket or you can set up a policy that is funded by your super. It is important to understand the restrictions on inside super policies. Policies can also be split to allow you to get all the benefits of personally owned cover while reducing cash flow impact. An adviser can help you to arrange the best policy for your circumstances.


Trauma/Critical Illness Insurance

What is it? A lump sum payment if you suffer a critical illness such as Cancer, Heart attack and stroke as well other events such as the loss of limbs, sight and hearing.

Why do you need it? Being diagnosed with a critical illness is an incredibly stressful and difficult event as well as potentially financially crippling. A critical illness can mean higher medical costs as well significant losses in income.

How much do I need? Your required level of Trauma will depend on your circumstances, it’s important to consider such costs as medical care, lifestyle expenses and education costs. It’s often underestimated how high these costs are and its important to consider if you would like your partner to take unpaid leave at this time.

How do I pay for it? You can only pay for your trauma directly either monthly or annually.


Your wealth protection portfolio is critical to maintaining your long term wealth strategy and ensuring your family lifestyle is maintained regardless of an unexpected injury or illness. It’s important you meet with a professional who gets to understand your circumstances and provide you with a tailored strategy to protect your family. If you would like to review your wealth protection strategy including any existing policies you have, reach out to the team at Abbotts Personal Insurance today.

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