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Life insurance and income protection: Thinking about the unthinkable SINGLE MOM

Life insurance and income protection Beanstalk single mothers

Have you ever lay awake in bed at night thinking about what would happen to your children if something unexpected happened to you?

I suspect the answer is probably yes. And while no parent wants to spend time thinking about the unthinkable, unfortunately it can be part of your role as a parent that you have to spend time thinking about all the important things, no matter how hard it may be. This can include life insurance and income protection.

It is even more difficult for single parents to think about it. Many single parents do not have the luxury of knowing that a current or former partner shows up and cares for their children. But of course this means that it is even more important for single parents to have a plan to take care of their children when they cannot.

If you could not work for a long time, could you still cover your daily living expenses, including rent and mortgage? And if you die, are you sure that your children are financially secure?

It is too easy to put income protection and life insurance in the “too hard” basket and tell yourself that you will make it another day. Not only is it an uncomfortable topic to think about, it’s also confusing to understand the difference between life and income protection.

This article is designed to help you understand and navigate some types of insurance that can help protect your family’s financial future.

WHAT IS THE DIFFERENCE BETWEEN INCOME PROTECTION AND LIFE INSURANCE?

Simply put, life insurance can help take care of your beneficiaries when you die (actually it should be called “death insurance”, but I think it didn’t get past the marketing department …). Income protection, on the other hand, is about replacing part of your income if you have been unable to work for a long time due to injuries, accidents or illnesses. It is important to understand that income protection does not cover you if you quit your job, get fired, or get fired.

HOW DOES INCOME PROTECTION WORK?

If your family is dependent on a single income, the thought of that income disappearing is frankly terrifying. Income protection insurance can provide single parents with peace of mind like it Replaces a percentage of your income (usually up to 75%) if you are unable to work due to illness, accident or injury. Income protection is usually paid weekly or monthly (like normal income) and is designed to help you cover living expenses such as rent, mortgage, bills, and general daily costs for single parents.

When you take out an income protection policy, you can determine how long you receive benefits (usually between two years and / or up to 65, which obviously affects the cost of your premium) and how long you wait (anywhere) need two weeks to two years).

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Income protection may be tax deductible

In some cases, income protection policies can be tax deductible, which can help make the premiums more affordable. You can also choose to fund your income protection through your retirement savings so that it does not affect your take-home salary (however, if you choose this option, it is not tax deductible).

WHAT ABOUT LIFE INSURANCE?

No parent wants to think about what would happen to their children if they died, but for single parents, this is even more confrontational. While nothing would replace your presence in your children’s lives, life insurance can help ensure that their financial needs are at least taken into account.

The term “life insurance” is often used as a collective term, but there are actually several different types of life insurance that help protect your family if you die or have been permanently disabled. In contrast to income protection paid in installments, life insurance is paid as a lump sum and helps cover expenses such as a mortgage, funeral costs or educational fees for your children.

WHAT ABOUT TPD AND TRAUMA? WHAT ARE YOU?

In addition to income protection, there are three main types of life insurance, which are generally summarized under the generic term “life insurance”:

  • Term life insurance (this is essentially death insurance) pays a pre-agreed amount in a lump sum at the time of death.
  • Trauma cover is insurance cover for critical diseases such as cancer, stroke and heart attack. It is paid in a lump sum that can cover medical expenses as well as the ongoing costs of recovery and rehabilitation.

There is some overlap between the different product types so you may be able to decide that you only need a few or want the protection that results from having all of your bases covered. Before you decide on an insurance level, read the insurers’ Product Disclosure Statement (PDS), which contains information on the inclusion, limitation and exclusion of insurance contracts.

BUT DOES MY SUPER PROVIDE NO LIFE INSURANCE?

Most pension insurance policies include life insurance, but this may not be enough to cover your family’s financial situation. It is worthwhile to find out exactly how much is covered by your super policy and to decide whether it is a reasonable amount. If not, you can choose to create a stand-alone policy.

I’m too busy to think about it!

Parents are busy people, and single parents are almost the busiest people on the planet! So if income protection and life insurance have been on your to-do list for some time, but you haven’t taken care of it yet, it may be time to get started.

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The qualified life insurance consultants from iSelect help you to compare different life insurers and insurance companies[1], And hopefully that means you have one less thing to worry about when you’re awake in bed at night …

[1] Jessie, please provide the ISU’s life insurance and income protection disclaimer on the websiteLife Insurance and Income Protection Beanstalk Single Mums Pinterest

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