Written By Justin Cilmi
If you travel, especially overseas, you know the importance of travel insurance - lost luggage anyone? And if you have a car or motorbike then you know it’s a no brainer to insure your wheels.
But there are other kinds of insurance even if you're young and healthy today that are important to help you protect your lifestyle and independence.
Protect your income
Income Protection can help you pay your rent or mortgage, cover medical expenses and bills and continue to fund your lifestyle if you can’t work because you become sick or injured. If you’re not sure you need Income Protection insurance, ask yourself how long you could continue to meet your day-to-day living expenses if you suddenly were unable to work for a lengthy period of time?
Trauma Insurance (Can you afford)
Another insurance worth noting is Trauma insurance which provides a lump sum payment when you suffer a major medical illness. Trauma insurance can help ease the financial stress of major expenses to give you financial peace of mind so you can focus on what's truly important - your recovery.
Save money – take out Private Health Insurance
There are many good reasons why it is essential to take private health insurance especially while you’re young and healthy. The first is that it can save you money. Private health insurers offer Lifetime Health Cover which is designed to encourage people to take out hospital cover early in their life and keep it. Because of this, health insurers must charge extra to people who join a hospital policy after the age of 31.
The extra charge is 2% on top of the normal premium for each year you are over 30 years of age. For example:
- If you don’t take out hospital insurance until you are 40 you’ll pay an extra 20%.
- If you wait until you are 50 it’s an extra 40%.
Avoid the surcharge (Can you afford)
The Medicare Levy Surcharge (MLS) occurs if you don't have private hospital cover. This means for most people who are single with a taxable income over $90,000 ($180,000 for couples, families and single parents) the government will charge an extra 1% in tax.
The MLS will increase to 1.25% if you earn over $105,000 ($210,000 for couples, families and single parents) and 1.5% if you earn over $140,000 ($280,000 for couples, families and single parents).
According to iSelect – the private health comparison website, depending on your circumstances, you may be able to buy basic hospital cover that is cheaper than the surcharge that has to be paid in additional tax.
Apart from saving money, having to self fund medical care, for example knee surgery after that stack skiing last season can cause a serious dent in your savings.
5 reasons to take your insurance more seriously
As we move through life, find a partner, raise a family, and maybe start a business, the importance of insurance in a long term plan increases. That’s because insurance is all about providing a financial safety net that helps you to take care of yourself and those you love when you need it most.
Here are 5 reasons why insurance matters.
Protection for you and your family (Can you afford)
Your family depend on your financial support to enjoy a decent standard of living, which is why insurance is especially important once you start a family. It means the people who matter most in your life may be protected from financial hardship if the unexpected happens.
Reduce stress during difficult times
None of us know what lies around the corner. Unforeseen tragedies such as illness, injury or permanent disability, even death – can leave you and your family facing tremendous emotional stress, and even grief. With insurance in place, you or your family’s financial stress will be reduced, and you can focus on recovery and rebuilding your lives.
To enjoy financial security (Can you afford)
No matter what your financial position is today, an unexpected event can see it all unravel very quickly. Insurance offers a payout so that if there is an unforeseen event you and your family can hopefully continue to move forward.
Peace of mind
No amount of money can replace your health and wellbeing – or the role you play in your family. But you can at least have peace of mind knowing that if anything happened to you, your family’s financial security is assisted by insurance.
A legacy to leave behind (Can you afford)
A lump sum death benefit can secure the financial future for your children and protect their standard of living.
While taking out insurance is a personal choice, you must remember that nothing in life is predictable and you should look at how you can protect yourself and your family in those uncertain times.
To help understand the differences between the various types of insurance, benefits and disadvantages of holding insurance through superannuation, a qualified financial adviser can help you navigate through this and help you configure an insurance set up that works for your lifestyle.
Important Note: The information provided about is in intended as a guide only. It is important to seek professional, accredited financial advice when considering whether the information is suitable to your personal circumstances.