A well constructed financial plan takes into consideration 2 parts – wealth creation and wealth preservation. Wealth creation is the part of your financial plan that helps you build your assets to meet your financial goals, for example, planning for retirement and ensuring you have enough money for your future, saving for your children's education or an overseas holiday. Wealth preservation on the other hand, protects you and your ability to create this wealth. Your wealth creation plan will be based on the assumption that you stay healthy and live to a certain age. But there may be unforeseen circumstances which can impact on your plans. Risk insurance will help you still meet your financial goals if you lose your ability to work or suffer a serious illness.

Why have risk insurance?

Risk insurance shifts the financial burden created by personal risks to insurers who can afford to cover them. It provides peace of mind that you and your family are financially secure in the event that you cannot work because you are temporarily or permanently disabled, or if you die.

There are different types of insurance policies for different needs, including the following:

Life Insurance

Life insurance provides financial protection for your dependents in the event of your death. The cost depends on the type of cover you choose. You should review your insurance plan regularly to ensure you are not under or over-insured.

The most appropriate insurance policy is one that strikes a balance between affordability and favourable policy conditions. To decide how much cover you need, it is important to consider:

• Your current assets and liabilities, especially the amount outstanding under a mortgage
• How much you would need to maintain your family's standard of living
• Whether you may need to pay for a housekeeper or day care for your children

Life insurance can be used to repay debts, cover your dependents for the loss of your income and/or secure your business.

Total and Permanent Disability (TPD)

TPD is additional life insurance cover. It pays a lump sum if you cannot ever work again because of illness or injury. TPD can be used to repay your debts, cover capital gains tax liabilities and cover your dependants for the loss of your income.

It is very important you have read the terms and conditions regarding the conditions under which the insurer will pay for the claim before taking out TPD insurance cover. We recommend that you speak with an Intellichoice financial planner about your requirements and they will be able to assist you in finding an insurance policy that suits your needs.

Income Protection

An income protection insurance policy generally pays you up to 75% of your monthly income if you cannot work due to illness or injury.

The premiums you pay on income protection insurance are tax deductible. However, payments you receive under the insurance policy are classed as assessable income for tax purposes.

Trauma Insurance

Trauma insurance pays a lump sum if you suffer a specified traumatic event, such as the diagnosis of cancer or coronary disease.

Should you get insurance through superannuation?

You can potentially benefit from tax deductions and cheaper costs when you hold insurance within your superannuation. For this reason, many super funds now offer insurance as an option in their products. However, you should be aware that there is a wider choice of insurance cover available outside superannuation and we recommend that you do your research first on the various insurance policies through super and outside of super to ensure that it suits your specific needs.

Read the contract before you sign the contract

When you take out insurance, it is important to read the insurance policy contract thoroughly. Make sure you understand exactly what the insurance policy is insuring you against. If there is anything you are not sure about, ask your financial planner to explain it to you. This may help you avoid any complications if you or your estate needs to make a claim on the insurance policy.

Things you should consider

You need to be sure you are not over-insured, or worse still, under-insured. The type and amount of risk insurance you may need depends on a number of factors including:

• Your personal financial circumstances and objectives
• Your lifestyle needs
• How many dependents you have
• Your age

As your wealth grows and personal circumstances change, your need for insurance cover may also change, so it is important to review your insurance cover regularly.

A financial planner from Intellichoice can help you assess your insurance needs as part of your overall financial plan. Call 1300 55 10 45 to speak to one of the financial planners at Intellichoice today to find out more about the various personal insurance policies we have available.