Why It Is Essential For Young People To Take Out Insurance

During your lifetime you'll probably take out a number of insurance policies to protect yourself and your family against the risk of loss. Even the most watertight plans aren't immune to unforeseen events, and insurance offers a safety net for the unexpected.

If you were to be struck down by an out-of-the blue illness or injury, how would you maintain your mortgage repayments, car loan repayments, mobile phone bill, or financial support for your spouse and children? Insurance can help to ensure that a tragedy is not further compounded by financial hardship.

Listed below are various Insurance policies to help minimize your financial risk.

Income Protection

Income protection insurance provides a payment stream usually 75% of your income, in the event that you are unable to work due to unforeseen illness or accident. This type of insurance will allow you to maintain a reasonable standard of living if you are not able to earn an income for a period of time.

Critical Illness Insurance

Also known as trauma insurance or crisis insurance, this type of insurance offers financial protection in the event of a medical trauma. Critical illness insurance covers specific conditions, such as heart attack, stroke, or cancer.

Lump Sum Insurance

Lump sum insurance is one form of personal protection purchased to insure against the economic or financial loss that would be suffered in the event of total and permanent disablement or premature death. Lump sum life insurance products provide a lump sum payment should the insured event occur. The amount of cover that you purchase is usually related to your level of debt and need to protect your lifestyle. The amount of cover chosen would include a sum of money that could be used to generate a replacement for your future income to provide for your dependants.

Lump sum products include Life Insurance and Total & Permanent Disability Insurance.

Insurance for different stages of your life

Insurance is not static, and your need for cover will change as you move through different stages in your life. The amount of insurance you require will be influenced by your income, your assets, your liabilities, whether you are married, and the number of dependants you have - all of which can change depending on your life stage.

You need to review your insurance needs at least every two years to take into consideration any change in your earning capacity, changes in the cost of living, increased liabilities like a home loans or personal loans or increases in disposable income. This will ensure that your level of insurance cover is always adequate.

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Published on January 1-th, 2012 in Insurance
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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