Personal insurance is an aspect of household finances that tends to be ignored.

Although your superannuation may offer some protection, a close look at the cost of not having yourself protected highlights the risk many Australians are taking.

Let's consider a young couple James (aged 35) and Jenny (33). They have two young children. James, a manger, has an annual salary of $80,000 and Jenny earns $35,000 in an administration role.

They have a mortgage of $400,000.

In the unfortunate event that James or Jenny died or were permanently disabled, the surviving spouse would be in a challenging predicament.

Aside from the emotional trauma, their financial world would be turned upside down.

First, there would be a sizeable mortgage to contend with. Then, if James was no longer earning an income, the household would lose possibly 30 years of his earning capacity.

Although Jenny earns less, the financial impact of not having her salary for 30 years would also be substantial.

A good first step to protect yourself is to investigate the life insurance and total and permanent disability (TPD) cover you already have through your superannuation fund and any current policies.

As a minimum, your cover should match your level of debt. But it pays to also have a contingency to guard against the loss of an income-earner.

Let's say James and Jenny require $60,000 a year to meet their living expenses.

Over 30 years, they would need more than $1 million to keep their household running.

Such an amount would not be easy to find, particularly if the surviving partner couldn't work full-time. Without another source of income, the couple's lifestyle would be at risk - which is where life insurance comes in.

Beyond life and TPD cover there are other types of insurance to consider.

Trauma insurance protects against a serious, short-term illness. A reasonable sum for an insured amount is twice the person's salary, plus an amount to cover medical costs.

As its name suggests, income-protection insurance guards against the loss of your ability to earn an income.

It usually covers as much as 75 per cent of salary and, importantly, the premiums for income-protection insurance are tax-deductible.

One way of reducing the cost of insurance is to purchase it through your superannuation fund, as the premiums are effectively tax-deductible. And insurance within superannuation is normally based on group insurance products, which are cheaper.

But this approach may come with risks and limitations. For example, the ability of a trustee to pay a TPD benefit from a superannuation fund is more restrictive than a person taking out personal insurance outside of superannuation.

A self-employed person is better off insuring for TPD outside superannuation, as they are not eligible for a tax-free portion of the TPD benefit that is attributable to such a benefit paid to employees.

To state the obvious, the time to review your insurances is before something happens that makes you wish you had.

Rural & General Insurance Broking can help you with sourcing the right TPD and Life insurance covers to best suit your needs. Please feel free to contact for assistance.