Superannuation is essentially a company pension plan. In the United States, there are two different types of superannuations; they are defined-benefit and defined-contribution. A defined-benefit plan is a company benefit that utilizes a formula that considers the length of employment and salaries history into account. The employees have restrictions on when they can get the money and how they use the money. Pension plans are not as standard as they once were due to the high cost to the employer.
A defined-contribution plan is tax-deferred and often in the form of either a 401(k) or a 403(b). Under these plans, individuals put a set amount of money from each paycheck into the fund. These plans are more common because they cost the employer less, and employees have more control over their funds, which they many prefer.
Superannuation is different from life insurance in that they are intended for use before you pass. They provide funding for your retirement years. While pension plans can also provide compensation for a spouse and children after death, they are intended for retirement and should not take the place of life insurance.
Life insurance is an insurance plan you take out for a specific benefit amount that you pay towards each month. Many employers offer some kind of life insurance policy for their employees. However, you can also purchase a policy directly from an insurance company, which is highly recommended even if you have a company policy.
Life insurance only pays out after death. There are two basic types of life insurance policies, which are term life and whole life. A term life policy is for a set number of years. For example, you can get a 30-year policy, which will payout in the event of your death if it happens within 30 years of starting the policy. At the end of the policy, you can start a new policy with different terms.
Term life insurance policies are common for younger people who may experience significant financial changes over the life of the policy. For example, if you have young children, you want to make sure your life insurance benefit is enough to ensure they are cared for through adulthood. However, after 10, 20, or 30 years, your children will be older, or adults themselves, and the financial needs will ideally be less.
Whole life insurance you pay on for the length of your life. They are more expensive, but you can also borrow against them, which can make them highly valuable in the event of a financial emergency. The monthly premium is typically higher than a term life insurance.
While there may be some overlap, superannuation and life insurance are two very different things. To protect and provide for yourself and your family financially, it is essential to have both in place. Having both will ensure you have a comfortable life after retirement, and your family has financial stability after you pass.
Even if your employer offers life insurance, it is vital to have a policy outside of your employment to protect your family in case you lose your job or your benefits change. Having multiple policies is also beneficial. You can go online and compare life insurance policies with iSelect.
It is crucial to compare policies based on your information and circumstances, as opposed to accepting general life insurance information. ISelect will provide a breakdown of options and policies that will guide you through the process and give you the peace of mind that you are getting the best protection for your family after you are gone. If you don’t currently have life insurance, look into it today because you never know when you are going to need it.