Why you need insurance, what are your options?

Nick McKenna • June 11, 2025

Woman and child working together at a pottery wheel in a bright workshop. The child is helping the woman shape the clay.

Insurance; we don’t need it until we do. Learn all about the value of insurance for protecting your health, income and loved ones when life throws you a curveball.

Protecting your wellbeing and your wallet

“Do I really need this insurance?” It’s probably a question you’ve asked at some point when deciding whether to part with your money. But maybe the real question should be “What if I became ill, how would we cope?”

Your health and wellbeing is the most important asset you have, so it pays to put in the hard yards and get your head around the tricky topic of insurance. Illness or injury can strike at any age or life stage, and it certainly doesn’t wait for the most convenient time to happen. Having peace of mind about having enough money if things take a nosedive could be your best investment yet, as well as helping you sleep at night.

When insurance is a good idea

Often insurance can come on your radar off the back of someone you know falling really ill or when you read something scary in your news feed. These events can make you stop and think but you don’t need to wait for a warning signal. In fact, getting on the front foot ahead of major life changes is often the best reason to get your insurance sorted.

Here are some scenarios to have a think about:

Landing your dream job – no job is completely secure and if you’re about to ramp up your income your lifestyle is probably going to upgrade too. If one day you lost your income, how long would you be able to pay the bills?
Switching to an income that’s up and down – while the gig economy or a well paying contract has its lifestyle benefits, there is a trade off. You don’t benefit from things like sick leave or annual leave and if your income takes a sudden downturn, you might be left struggling for cash.
Starting a family – when you settle down with a partner or have kids, it’s not just about you anymore. You’re going to have someone who truly depends on you and what happens to you will have a big knock on effect on them. Starting a family might also mean taking on a bigger mortgage.
Getting your head around the important lingo – Insurance jargon is one thing you’ll need to make peace with as you navigate your options. If you’ve looked at the insurance section of your super statement, you may notice ‘Death’ insurance – but did you know it may also cover you for a terminal illness diagnosis? And what on earth is TPD? How do you know what constitutes Total and Permanent Disability? Don’t worry, we’ve got all the details below.

Reading the fine print

But first, a word about insurance policies. While having a general understanding of what type of policy covers what, it’s no substitute for reading your insurance product disclosure statement (PDS) and knowing exactly what you’re getting. Just like travel, or home and contents insurance, policies and the amount they pay out can vary a lot. So it’s worth reading the fine print on something so important in your life.

Protecting your income

If you’re working and you, or your family rely on your income to cover the bills, you should be giving serious thought to taking out insurance to protect your income. You have two options for this:

Income protection – if you become ill or injured and can’t work for a short period of time, income protection will provide monthly payments up to around 70-85% of your income to help cover your expenses. This cover is available directly through an insurance company or via your super fund but it may not be automatic – you may have to opt in or apply for cover. Some generous employers may build income protection into a benefits package and pay your premiums for you.
Total and permanent disability insurance (TPD) – as the name suggests, this cover is designed for when you experience a permanent disability that prevents you from ever working again. For example, if you were to have a serious heart attack or stroke that required six months’ of rehabilitation and you’re unable to return to work again for a job you’re qualified for, this cover may pay out. Again, you can get this type of cover directly through an insurance company or via your super fund. In fact, this cover may already be automatically included within your super fund. Cover is also available outside super, where you can apply for ‘own occupation’ insurance. Instead of paying out only if you are unlikely to ever work again in any reasonable job you could do, own occupation cover will pay you if you can’t return to the job you were working immediately before you were injured or became ill.
Life cover – also known as ‘Death’ cover which pays a lump sum amount of money if you die. The pay out goes to whoever you nominate as beneficiaries or your estate. As with TPD, you may receive this type of cover automatically as part of your employer’s default super fund. And some life cover will also pay out if you are terminally ill, meaning you can use the funds to help your family before you pass away.

overing yourself for critical illness

One of the most important types of insurance you can get is the one you can’t get through your super fund. Trauma (also known as critical illness) cover will pay you a lump sum of money if you are diagnosed with a serious illness, such as coronary and cancer illnesses. These conditions often need years of treatment or rehabilitation, which can be very hard to manage without any financial support. Trauma cover can work hand in hand with income protection, which gives you regular payments instead.

Trauma cover isn’t cheap but it certainly pays off if you need it. And in the event you’re dealing with a serious and stressful treatment such as chemotherapy, you won’t have to worry about money or spend time and energy trying to keep earning an income.

One caveat about trauma cover – it doesn’t cover you for ‘low level’ strokes or cancer where your work is not going to be significantly interrupted. For example, if you need treatment once a week, this would not be considered a serious interruption and the insurer is unlikely to pay out your claim. Each policy is different and it’s important to understand what to expect before taking out any insurance cover.

At the end of the day, insurance is about removing the stress of not having enough money if you become unwell. What works for you might not work for someone else.

Source: MLC

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Understanding longevity risk in retirement

By Nick McKenna • October 28, 2025

Australians are living longer than ever before due to a combination of factors including improved healthcare, better living conditions and over all better quality of life. With this longevity comes the challenge of ensuring financial security throughout a longer retirement. Data from the Australian Bureau of Statistics (ABS) shows that life expectancy at birth is now 81.1 years for males and 85.1 years for females1. Despite the increases in these averages, many Australians will live well beyond these ages, making planning for your retirement income more important than ever. What is longevity risk? Longevity risk refers to the possibility of outliving your savings. Living longer allows you to enjoy the fruits of life for longer but it also means planning carefully to ensure your savings last as long as you do. For Australian retirees, this is especially important, as the Age Pension alone may not be enough to cover all living expenses over an extended period. According to the Challenger Retirement Happiness Index2, 72% of Australians aged 60+ report that the rising cost of living has adversely impacted their financial security, with 34% admitting the impact was significant. This highlights the importance of planning for longevity risk to maintain financial confidence in retirement. Building financial security for the future To ensure a comfortable and secure retirement, it’s important to take proactive steps to manage longevity risk. Here are some key considerations: 1. Understand how long your retirement savings may last Knowing how long you might live can help you plan your finances to last throughout retirement. Factors like health, lifestyle and family history can play a role in estimating life expectancy. 2. Understand your income sources Retirement income can come from a mix of sources, including the Age Pension, superannuation, personal savings and investments. For many Australians, the Age Pension alone may not be enough to cover all living expenses, especially if superannuation or other savings run out. Adding a source of regular income such as a lifetime annuity to your retirement income plan can help you manage the risk of outliving your savings. By using some of your super or other money to set up a lifetime income stream, you could create an additional layer of secure income that complements the Age Pension, if you are eligible. This approach helps to provide peace of mind by ensuring you have a regular source of income that can cover essential needs throughout your life. This can form part of a comprehensive retirement income plan. 3. Use planning tools and resources Make a budget The Age Pension is a key safety net for many Australians. Consider how it works, including eligibility and its role alongside superannuation and lifetime income streams. For personalised guidance to help you make informed decisions about your finances, consider accessing free services like the Financial Information Service (FIS) offered by Services Australia or see a Financial Adviser. The benefits of financial security Financial security can transform retirement into a time of freedom and fulfilment, allowing retirees to focus on what truly matters. With a lifetime income stream you can enjoy meaningful activities like traveling, pursuing hobbies or spending quality time with loved ones without the stress of financial uncertainty. The Challenger Retirement Happiness Index2 reveals that 41% of Australians aged 60+ see "having enough money to enjoy retirement" as essential for happiness, while 33% value knowing their money will last. This financial confidence provides the foundation for a retirement filled with confidence, happiness and peace of mind. Planning for a confident retirement A well thought out retirement plan provides the confidence to enjoy life without the constant worry of running out of money. By understanding longevity risk and taking proactive steps, you can feel more confident that your retirement income will last as long as you do. Source: Challenger