Insurance

Read these articles. They will make you think. 

MR JAMES DUNN, THE AUSTRALIAN 2010

YOU insure your house, your car, your holiday, maybe even your life. But do you insure your income?

You should because it is probably your biggest asset.

Steve Mitchell, head of wealth management at research firm Canstar Cannex, says many people simply do not understand the significance of their income-generating capacity over their lifetime.

For example, he says, two 30-year-old professionals with a combined income of $150,000, indexed at 5 per cent, will earn $9.4 million until retirement at age 65.

"Even a 25-year-old earning $1000 a week would make $3.3m in gross income to age 65, and that's without a pay rise at any stage," Mitchell says. "If you put it to people like that, they start to see the sense in insuring it because they would most certainly insure a house worth that much."

DR SALLY PHILLIPS, RISKINFO MAGAZINE

Insurance is all about protecting you and your family in the event that something bad happens, such as an accident, illness or in the worst possible case, even death.

Despite the fact that many Australians have a level of life insurance cover within their superannuation fund, Australia remains one of the most underinsured nations in the developed world.

Individuals firstly need to think about their personal circumstances and what the potential financial consequences could be as a result of any of these things happening to them. If you became seriously ill and were unable to work for six months, what impact would this have on you, your family and your lifestyle? Also, importantly, what cover would you need to make sure you could reduce or eliminate the impact?

By thinking about the potential impact, this should help you to consider what sort of life insurance cover you need and how much cover you should have.

For example, the Lifewise campaign highlights that one third of women and a quarter of men will suffer from cancer at some stage in their lifetime, over half of whom will live for longer than five years after the diagnosis.

If this was you or your family, what would this mean financially and how would it change your living situation?

But if it only pays if you're no longer here, why would we need it?

One common misconception when talking about life insurance is that it relates to 'life' and only pays a lump sum on death, but there are numerous other types of insurance to cover a range of circumstances. These include: total and permanent disability (TPD), trauma and income protection insurance.

In the event of a serious accident or illness, TPD pays a lump sum if individuals suffer total and permanent disability and are unlikely to be able to work ever again. Trauma insurance works by paying policyholders a cash lump sum if they develop or suffer certain conditions, while income protection insurance can provide a monthly benefit of income in the event of a disability which leaves the policyholder unable to work.