What questions to ask a financial adviser
Before you take out life insurance, make sure you ask the following questions with your financial adviser. Also remember that a lot of the online quoting sites provide general advice only. Our staff are qualified to provide financial advice and are qualified financial advisers that specialise in risk insurance.
- What types of cover do i need?
Deciding what you need cover for is important. You can start off by asking yourself (and your adviser, of course) can i do without these types of insurance?
Life cover: Pay’s a lump sum amount in the event of death or terminal illness. This is to cover such things as living expenses for your dependants, pay off debts, funeral costs, children’s schooling costs etc. A financial adviser will help not only with determining a suitable insured amount, but also how best to set up the policy and the possible tax implications on dependants.
Total and Permanent Disability (TPD) cover: This pays a lump sum should you become totally and permanently disabled and unable to work. TPD cover can help to pay out of pocket expenses, ongoing medical expenses, home modifications and to care of dependants if needed. A financial adviser will be able to explain the difference between own and any occupation.
Trauma cover: Also known as Crisis cover with some insurers. Trauma/Crisis cover pays a lump sum on the diagnosis of a serious illness or injury (eg heart attack, stroke or cancer). This amount can help with any medical costs associated with a Trauma/Crisis condition or help with an extended break from work. A financial adviser will be able to provide advice on what types of Trauma cover is available as well as additional extras such as reinstatement, life buyback, Trauma stand alone etc
Income Protection: Pays a monthly benefit to replace your income, if you are temporarily disabled and unable to work. You will need to determine how long you wait for the first payment should you be on claim (this is called the waiting period) and for how long you are paid (this is called the benefit period). Your financial adviser will also need to make sure your income is enough to justify the insured amount.
- How much cover do i need?
When it comes to life insurance, everyone’s needs are different. Working out how much cover you need is as easy as sitting down with your financial adviser and determining a figure that is right for your personal situation. Your financial adviser will then assess the right amount of cover for you based on your personal circumstances including: your total debt position, income, assets including superannuation and property plus your family circumstances such as education and childcare needs.
- How long do i need to be protected for:
Nobody knows what the future will bring. That’s why it helps to plan ahead. You should start your insurance relationship with an expectation that your insurance needs will be continually adapted to your needs. The rule of thumb is that your need for financial protection decreases over time. For example, if you pay off your mortgage,reduce debts and no longer have dependants to look after financially, you may wish to review your cover.
You should keep your policy as long as you require financial protection. A good financial adviser should review your policy every 12 months to make sure the insured amounts are still suitable and to make any changes should your situation change.
- What should i look out for?
Buying life insurance isn’t difficult, but it does take some thought as well as comprehensive research. There are many companies online offering their services but it is important to take time to consider your choices and always make sure you:
-Are aware of injuries/illnesses the insurance covers
-Work closely with your financial adviser to understand your personal needs,objectives and financial situation
-Understand how your medical history/occupation/pastimes will influence your cover and potentially how much you pay
-Beware of shortcuts. Some direct insurers do not cover for things such as mental health, injuries whilst being intoxicated etc.
-Understand your medical history so you can disclose everything to your financial adviser. That way you’ll make sure the cover is right for you and there will be no issues should you need to make a claim.
-Be aware of the ongoing cost. Ask your financial adviser to provide you with a future forecast of premiums. This is so you can plan how you will pay your insurances in the years to come.
- What is the best way to pay- stepped or level premiums
Insurance premiums will generally increase over time-simply because your health risks increase with age. Most insurers offer two common ways of paying, and managing, the costs of your insurance over time.
Stepped premiums- This means each year as your policy renews, the premium increases. This means your premiums will get older as you age
Level premiums-These are more expensive upfront but generally cheaper over the life of the policy (depending on the age the level premium is taken out). A level premium won’t increase yearly with age although is not guaranteed to stay the same as insurers can increase both level and stepped premiums out of cycle.
A good financial planner will be able to advise whether a stepped or level premium is most suitable for your situation.
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*The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.
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