Still paying for insurance? Make sure it’s right for you
Why have personal insurance?
Through your working life, you may have taken out some personal insurance – cover to help give you or any dependants financial security if you were unable to work due to sickness or injury, or if you should become terminally ill or pass away.
Common types of personal insurance are:
- Income protection insurance – to cover some of your income if you’re off work temporarily due to illness or injury.
- Trauma insurance – to give you an income if a serious illness means you can’t work for a length of time.
- Total and permanent disablement (TPD) insurance – if you become permanently incapacitated and can no longer work.
- Life insurance – to provide your dependants with a lump sum payment if you pass away or become terminally ill.
You may have taken out your cover at a particular stage of your life – perhaps when you took out a mortgage or started a family. Or you may have been given cover through your super. Either way, as you move into a new stage of life, it’s important to review your insurance needs, so you’re not paying for something you don’t need.
Insuring your income
If you are still working – for instance, you are transitioning to retirement and you rely on the money you earn, it can still be a good idea to have insurance that protects your income. By having income protection and trauma insurance in place, a late setback in your health won’t necessarily scuttle your retirement plans.
Nevertheless, if you’ve reduced your work hours as you ease into retirement, it can make sense to reduce your level of income protection or trauma protection too. As some policies will only pay a benefit equal to what you’re earning now, check that you’re not over-insured and paying too much in premiums.
Once you stop working completely, there’s no need to have income protection and trauma insurance, as your income no longer relies on your ability to work.
Life insurance in retirement
If you and your partner are retired and have a reliable income from your super and other investments and you have no other dependants, it could make sense to cancel your life insurance policy. Remember, insurance premiums generally go up the older you get, so ceasing your policy could save you a good sum of money. Many insurance policies cease once you reach a certain age — so if you don’t feel you need it to provide for your partner if you should die, then it may not be worth the premiums you pay.
However, you may want to have a small amount of life cover to be able to provide money for the costs of your funeral or other final expenses, such as outstanding debts or bills. Some people also keep life insurance so they can leave money to a cause that’s dear to their heart or to boost the inheritance they leave to their loved ones.