Don’t underestimate the importance of insurance

The first ingredient of a realistic and achievable financial road map is to build a solid financial foundation. Insurance, also called protection, is the one of the critical components to your financial foundation – after paying off lifestyle debts and building an emergency fund.

Insurance is how you and your family survive one of life’s curve balls that are thrown at you.

Insurance can help to safeguard your future – and your loved ones’ futures when you’re gone. But it’s a jungle out there with lots of misinformation and complicated terminology that seems designed to confuse people.

What to insure?

There are many insurance policies you can take out, with no hard and fast rules about which ones you need. It really depends on your situation and level of risk.

Here’s a breakdown of some of the more widely used insurance policies, and why you might need them.

Income protection: your ability to earn an income is your most valuable asset. Someone earning an average wage for 35 years could earn over $3million! So it’s worth protecting this. Income Protection insurance will pay around 75% your regular income, giving you peace of mind that you and your is protected while you recover from illness or injury that stops you from working.

Total and permanent disability cover: gives you a lump sum payment if you develop a significant lifelong disability through illness or injury.

Life insurance: provides a lump sum to your designated recipient(s) if you die.

Trauma cover: pays out a lump sum upon diagnosis of a serious medical condition, such as cancer or a heart attack.

Health insurance: one serious illness could lead to financial ruin. Adequate health insurance protects against the unexpected.

Car insurance: run into the back of a Lamborghini and the bill can be in the tens of thousands. Protect yourself and your car should an accident occur.

Home and contents insurance: reimburses you for damage or loss of a property you own and your possessions.

Renter’s insurance: protects against fire or theft and the resulting damage or loss of possessions.

Mortgage protection: ensures that you won’t lose your home if you become unable to make your mortgage repayments in the event of illness or serious injury (not to be confused with Lenders Mortgage Insurance, ‘LMI’, which protects your lender in the event that you can’t repay your mortgage).

Travel insurance: covers you in case you have an accident while overseas, lose your luggage or your trip is cancelled. Getting sick in USA can be very, very expensive.

Questions you should ask before signing up for insurance

  1. Is the insurance provider reputable?
  2. What types of cover are available, and what do they include?
  3. What is the excess – the amount you have to pay in the event of a claim. The insurance company pays the rest?
  4. What percentage of the bill is covered?
  5. Are there any discounts for combining services?
  6. Is there a waiting period before you can claim?
  7. Is age a factor?

Give us a call at 08 8231 4709 or you may also reach us at info@centrawealth.com.au. Get in touch with us to find out how insurance could help you look after your family and your lifestyle.

Article reproduced from MapMyPlan

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Zac Zacharia (Managing Director) has been assisting clients to create wealth and secure their futures for over 14 years.

He is also an accomplished presenter and educator

Co-authoring the popular investment book, Property vs Shares.