Tuesday, November 22, 2011

10thousandgirl Post: A young woman's journey through insurance

Life Insurance Young Women 10thousandgirl

Hi All, here is another post I've written for the 10thousandgirl Campaign. Enjoy!

I am on my insurance journey. Not quite the same as an ‘Eat Pray Love’ sojourn but enlightening nonetheless. It is something I never really paid much attention to besides the compulsory insurances that come along with having a car or traveling to far off places but I feel now is the time to find out more about what I don’t even know.

Insurance is a topic that can get lost in our priorities due its daunting and seemingly boring nature. Normally an upbeat and optimistic individual, I’m learning that I need to be proactively responsible for my life and my interests (and the interest of those close to me) and look at the potential risks that can happen in unforeseen circumstance. Have you thought about the consequences to your future and your significant ones if something (not so nice) happened to you?

Insurance is an empowering thing to have. You are proactively looking after yourself, your family and your interests in the midst of uncertain futures. We can do as much as we can to build bright prospects and put action plans in place but sometimes life happens and we need to have a safety net in place. Insurance is like having those extra rolls of toilet paper you didn’t need at the time but have now come in handy in an emergency – it makes an uncomfortable situation more manageable.

We are working towards everything working out fine, but protecting ourselves as much as possible against events that are probably out of our control is a responsible thing to do. Mitigate your risk. You don’t plan to have an accident that puts your back out for 6 months. You don’t plan for an illness that may come in and knock the energy out of you.  If something happened to you would your partner, children and family be able to cope financially with debts or other obligations you have? Hopefully these things never happen. But if they do, having the right insurances in place can be life changing and give a better quality of life for you and those impacted.

There are two broad areas of insurance that you should consider: General and Life.

General insurances are the ones you are probably most familiar with and have had or used to some extent. They include car, health, home & contents and travel insurance.

Life insurances on the other hand you may be less familiar with.  They have to do with policies that come into effect with death, illness, disability or temporary injury. Someone once told me that as young people, our biggest asset is our potential to earn money over our lifetime. As this is the case with most of us, shouldn’t we do something to protect that potential? That’s where different types of life insurance come into play:

  • Life Cover (also known as life insurance or death cover): pays a set amount of money to the policy’s beneficiaries when the insured person dies.
  • Total and permanent disability (TPD) insurance: covers the cost of rehabilitation, debt repayments and the future cost of living if you are totally and permanently disabled.
  • Trauma Insurance (also known as critical illness or recovery cover: provides cover if you’re diagnosed with a specified illness or injury that will make a significant impact on a person’s life (such as cancer or a stroke).
  • Income Protection: replaces income lost through your inability to work due to injury or sickness.
Everyone’s needs are different and you need to determine what is right for you. None of these may be applicable at your stage in life. Maybe it would be wise to have them all. Do your research, talk to others and seek advice from a financial planner if you need help.

One of the reasons I’ve started looking at these things is that I share a mortgage with my sister. If something happened to me that I couldn’t pay my half, I wouldn’t like to put her in the position of being responsible for the full amount. If you have financial obligations or debts it would be wise to investigate your insurance options.

Another instance would be if you have dependents. If you have children or others that are dependent on your income for their needs (housing, care, food, education etc) would they be looked after if you weren’t able to provide for them?

With all insurances, you need to take the time to analyse what your needs are, understand the types of insurance available and if they are applicable to you and compare different policies. If you find your situation complicated or you are not sure what you really need, it may be a good time to visit a financial planner or talk to some expert about your circumstances.

Do some research and find out a bit more. Start with sites such as www.moneysmart.gov.au or www.mozo.com.au for overviews, tips and comparisons.

Insurance tips (with help from www.moneysmart.gov.au )
  • Shop around. Get quotes from different insurers and compare what they offer. Don't be afraid to ask lots of questions.
  • Choose carefully. Write a list of the things you need (i.e. what you want covered) and pick the policy that meets your needs.
  • Renew your insurance. Do this when your old policy expires or as your circumstances change.
  • Work out how much you need. Do this when you start or renew your policy, so that you don't find yourself significantly underinsured. Insurance company websites have tools to help you work this out.
  • Check exclusions. Always ask what is and isn't covered by your policy. Learn these lessons from what other people have experienced (Queensland floods…)
  • Check the costs. You will pay a regular fee, known as a 'premium', for your cover. And when you make a claim your payout will be reduced by an amount, known as the 'excess'. Don't sign on the dotted line until you know all the costs.
  • Be honest with your insurer. Tell it like it is because your 'duty of disclosure' means you must tell the truth when you apply. If you leave details out, any future claim may be denied.
Where to go to get insurance?
You can buy insurance directly from an insurance company, through an insurance broker, through your superfund or a financial planner. There are pros and cons of buying insurance through your Superannuation fund and you may already have some form of insurance through them. See more about this here.

When should I review my insurance requirements?
You should do this once a year or when your circumstances change (ie marriage, having children, getting a mortgage).

So that is personal life insurance in a nutshell…Do take some time to investigate your options and requirements. Talk to your spouse, your family, your friends and/or a financial planner and see what you may need to have in place. It could make a big difference to you. I hope you never need to make a claim, but if you do, be thankful that you thought ahead.

Make great things happen. Live well. Live big. Live bold!

Arienne Gorlach is 10thousandgirl’s content manager. She has some insurance. She used a financial planner she thinks is quite cool. Arienne writes regularly on her own blog Savvy Sassy She.

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