We all have plans for the future but sometimes life can present us with some unexpected challenges.

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Life insurance can help ensure you and your family are financially secure when the worst occurs, such as a sudden death or a debilitating accident or illness.

If you are a member of a super fund, then the chances are you already have life insurance. But you may not know how much you are covered for, or how much you are paying. And the answer to these two questions may well be “not enough” or “too much”.

IFS Insurance Solutions principle group risk Shane Fielding says only about five to 10 per cent of superannuation members know their level of life insurance cover.

If you’re not one of these 10 per cent, then keep reading.

To insure, or not to insure?

Life insurance isn’t for everyone. 

For some, taking out life insurance is something they’ve never thought of, where others may have too much cover.

Mr Fielding says following the 18 month period of insurance premium increases, now is the time for superannuation members to find out how much cover they have.

“The impact of that (increase) is it’s eroding members’ account balances more than it has ever before,” Mr Fielding said.

“The way that income protection works, is the higher the level of cover, the higher the premium you pay.

“What members should be doing is considering whether or not the level of cover is right for them.”

Life insurance isn’t for everyone

NGS Super chief executive Anthony Rodwell-Ball says life insurance isn’t for everyone.

For example if you’re a young, single person entering the workforce, Mr Rodwell-Ball says a $6 or $8 a week premium is probably a waste of money.

However he urges people to reassess as they reach certain milestones in their life, such as marriage, gaining a mortgage and having children.

“Typically when you hit 60 and the kids are off your hands, you won’t need as much,” Mr Rodwell-Ball said.

“We look at it as a needs basis, and people always have discretion to increase it beyond the default and ramp it up when they need it.”

How is it calculated?

Mr Fielding says the cost of your life insurance is based on income, spousal income, debt levels and monthly expenses.

Calculate the right amount of life insurance for you. Picture: Shutterstock.

He says most superannuation funds will provide a twice-yearly statement, or you can log into your account online.

Mr Rodwell-Ball says you can also contact your super fund directly for more information about your level of cover, or visit their website and use the tools to calculate a rough guide.

“People forget and don’t realise these things aren’t typically inflated, so they do require a review,” Mr Rodwell-Ball said.

“A lot of people over-insure; it’s not sensible, you’re paying a premium you don’t need, and potentially reducing your super savings.

“However, the risk of over insuring is not as common as under insuring.”

Varieties of life insurance

Mr Fielding says make sure you’re aware of the different types of cover offered and work out what’s best for you.

Consider the different insurance options.

He says life insurance is provided by superannuation funds, but can also be applied for directly.

Lifebroker insurance website explains some of the confusing terms when it comes to life insurance:

Life insurance pays an agreed lump sum in the event of your death or diagnosis of a terminal illness.

Income Protection pays 75 to 85 per cent of your salary if, due to sickness or injury, you are unable to work, allowing you to protect your most valuable asset – your income.

Total and Permanent Disability (TPD) insurance provides you with a lump sum payment should you become totally and permanently disabled due to illness or injury.

Trauma insurance provides a lump sum payment in the event you suffer a set medical condition. This payment can be used to help with medical expenses and loss of income if a trauma event occurs.