We’re all familiar with and most likely have some form of insurance. In most instances it’s probably for an asset such as your home or car and we understand the importance of having that protection in place as we’ve worked hard to acquire them.
But how many of us think to insure our biggest asset? Ourselves. Getting a form of personal insurance or knowing what you have and what you’re covered for is a key component of any thorough financial plan.
There are four types of personal insurance we should all know about; Life insurance, Total and Permanent Disability (TPD) cover, income protection and trauma cover.
All premiums are based on factors such as age, gender, health and the amount of cover you choose that best suits your budget.
Most of us understand Life insurance and may already have it through your super fund. Life insurance pays an agreed amount of money if you die or should be diagnosed with a terminal illness and have less than 12 months to live.
How much will I need?
As you get older your financial responsibilities change and it’s important to review your policy at these times.
However, things to consider could include how much is needed to reduce or pay off debts such as a mortgage, your children’s education or other major purchases and living expenses.
Total and Permanent Disability (TPD) cover pays a lump sum should you become disabled and are unable to work again. The most common TPD claims were paid for accidents, musculoskeletal disorders, cancer and mental illness.
TPD cover can also be a component of your super fund. A crucial feature of TPD is whether you choose cover for ‘own occupation’ or ‘any occupation’. While ‘any occupation’ applies when you are deemed unable to return to any form of work. With ‘own occupation’ it means you’re only unable to return to your regular line of work. It means a higher premium but may be relevant to those who work in a specialised field.
Wouldn’t I receive a disability pension?
In the event that you did become permanently disabled the disability pension would be of some assistance but most likely wouldn’t be enough to maintain your standard of living which TPD has the potential to provide.
Losing the ability to provide an income due to illness or injury is a scary thought for most, so why wouldn’t you protect it?
You may qualify for workers compensation if you were injured in the workplace, but private health insurance will only cover some medical expenses and you might have sick leave entitlements but is it enough to see out your recovery? Knowing that your lifestyle and family are looked after offers piece of mind and allows you to focus on getting better.
What are the benefits of income protection?
Income protection can provide you with up to 75% of your regular income until you are able to return to work and is yours to spend as you choose. You can vary your premiums depending on wait time and benefit periods. Premiums are also tax deductible if you hold them outside of your super fund.
Trauma cover is just as important but sometimes misunderstood. Like life insurance, trauma cover pays an agreed lump sum of money in the event that you should suffer a serious illness or injury. Most trauma claims lodged are processed quickly and paid once finalised without waiting periods.
Why would I need it?
The purpose of trauma cover is to help you make the necessary changes to your lifestyle and allow you focus on your recovery so you can return to everyday life.
This might include costs associated with additional therapy, rehabilitation equipment or it might give your partner the financial ability to take time off work to help aid you in recovery.
Some of the most common paid claims were made for breast cancer, heart disease, heart attack and prostate cancer.
A trauma cover policy has the flexibility to be taken out to protect you or someone you care about, such as a sibling. Generally, you can’t take out trauma cover through your super, but you can opt to bundle trauma cover with other covers held outside of your super fund such as life insurance, which may reduce your overall premium.
It’s not something we like to think about let alone plan for but the reality is illness and injuries can happen to anyone. With the advances in modern medicine, our ability to suffer from but survive serious illness or injury is increasing. Adding financial burden is the last thing anyone would need. Taking the time to review your cover or tailor a policy to meet your budget and circumstances is an important step to ensure you are protected in the event that it does happen to you or someone you love.