Everybody has read the proverbial parable about the ant and the grasshopper. In the story, the grasshopper couldn’t care less about the future while the diligent ant works day in and day out for the coming rainy days.

The same principle of saving for the rainy days can also be best applied in purchasing life insurance for the future. Having one provides peace of mind and financial security to you and your family in the event of such unfortunate events like accidents, permanent disability, and death.

However, it is the biggest irony of all to think that people will give nary a second thought when purchasing car or home insurance to protect such possessions, but would disregard the most important thing in life – their life. Although no one wishes it to be, what if you will find yourself in an accident and permanently injured? Who will care for you and your family?

Australia is in fact considered to be one of the most underinsured developed nations, especially in the area of life and income protection insurance. Compared to the 79% for those who get car insurance, there is a paltry 45% for those who get life insurance. Furthermore, reports show that 70% of Australians are underinsured – a serious threat that could cost the Government $1.3 billion over the next 10 years.

Busting Myths and Fictions

Despite knowing the benefits that life insurance can bring them, people still procrastinate in getting one. Two of the most common reasons why people don’t buy insurance would be it is too expensive for their budget and too complicated for them to understand. Furthermore, there are a lot of myths and black propaganda that has circled over the years against life insurance. To separate fact from fiction, it is best to look into them closely.

Myth #1: Insurance through superannuation is enough.

Because it offers a lot of tax concessions, most Australians opt to purchase life insurance through their superannuation. However, most are also not aware that insurance in their super is set at default unless they actively pursue it. This means that the coverage under default insurance is very low and may not be enough.

Some of the benefits you can get from purchasing insurance through your super are the ability to use your super funds to pay for the premiums instead of purchasing a separate policy and the possibility of availing Government co-contribution. You can also qualify for a tax offset when making contributions on your spouse’s behalf. Furthermore, dependents can receive a tax-free lump sum in the event of the insured’s death.

However, despite the benefits and tax concessions you can get from purchasing insurance through your super, just make sure that the level of cover it provides is enough and complements your needs and your family’s. You might also want to know if there is a continuation option available when you have to leave your employer.

Myth #2: Insurance premiums are expensive.

It might be surprising to know that you can pay your monthly insurance premium simply by cutting some of the morning coffee you have. Aside from this, there are various provisions where you can avail life insurance at a reasonable cost. As mentioned, buying life insurance through your super means big tax concessions.

Another method of availing life insurance is to determine how long you think you need the coverage for. By making a clear definition of what you need, you will also be able to choose which premium is complementary to you.

There are basically two kinds of premiums – stepped and level although nowadays, you can have a combination of both.

In a nutshell, a stepped premium is something that you have to pay less on the onset, but grows as you age. That means that as you grow older, you will need to pay a higher premium. Therefore, a stepped premium is advisable if you are thinking on a short-term basis.

Level premiums, on the other hand, lets you pay a higher premium at the beginning but lower as you grow older. Thus, level premiums are a better choice when you are thinking of a long-term policy.
There is a third choice, however, which is fast gaining popularity – a combination of both. If your budget at the moment can’t really take to pay a higher premium at the beginning, then you might get a stepped premium which you can reconstruct to a level premium as your budget would allow you in the future.

Myth #3: I am not employed.

Another alibi that may come into play for not purchasing life insurance is being just a stay-at-home parent. Most people would think that staying at home exposes them to lesser risk than when at the workplace. This may indeed be true, but the loss of a homemaker in a household is as worse as the loss of the breadwinner.

Myth#4: I am young and healthy.

It is understandable that a young person without any debts won’t give any thoughts in purchasing insurance. However, the risks that a married and a single person face are the same. A young, debt-free person may not get comprehensive insurance, but he could surely consider getting one that would provide a steady flow of income when an accident or illness occur and would render him unable to work.

Myth #5: Insurance companies take a long time to pay the benefits.

Another which has made people wary of life insurance. On the contrary, studies show that life insurance companies have paid a total of $261 billion in claims and benefits between 2005 and 2007.
From providing your family the needed financial assistance to the preservation of your estate, insurance plays an important role in the securing your future.