Understanding Insurance Cover
Life is full of unexpected surprises. The positive one’s such as an unexpected promotion, a startingly great opportunity or the news of a child on the way are some of the most joyous moments of our lives.
Unfortunately, these surprises aren’t always good news. Accidents, serious medical diagnoses and loss of loved ones occur on an all too frequent occasion.
Fortunately, having an appropriate sweet of insurance cover can help minimize the financial impact to you and your loved ones in the event that an unexpected death, illness, injury or major health concern (such as a heart attack) was to occur.
Insurance is designed to provide you with peace of mind by removing the impact of financial stress as you are dealing with the more important issue of your family and/or health.
Insurance cover comes in a diverse array of types and the main ones are outlined below:
Life Insurance Cover
Life insurance is fairly straightforward being designed to provide a lump sum to your beneficiaries in the event of your untimely passing. This provides you with the soundness of mind knowing that mortgage repayments, education and living expenses will be covered without the financial stress of selling assets during one of life’s toughest periods.
Income Protection Income protection is designed to pay you a regular monthly benefit (and often includes superannuation contributions) in the event that you are unable to work due to injury or illness. In our opinion, everyone who works, makes a regular income or has significant debts should have an appropriate Income Protection policy in place. As a general rule, for 99.98% of the clients that we work with, their ability to earn an income is their most valuable asset by a significant margin.
If you are 30 years old, making $100,000 per year and plan on retiring at 65, before factoring in any pay rises and the life, your future income stream is worth $3,500,000! While insuring your $50,000 car might be deemed essential to you, in our opinion insuring an asset worth $3,500,000 should be a high priority.
Income protection can provide you with a safety net if you are unable to work in the event of a temporary disablement due to sickness or accident. It is designed to help maintain your lifestyle by ensuring your cash flow needs and expenses can continue to be met during a period of absence from work.
The premiums that you will pay for this type of policy are generally tax deductible. If you hold your insurance within super, the super fund is able to claim a tax deduction on income protection insurance premiums which can reduce the cost of the cover.
Trauma or Critical Illness Cover
This is designed to pay you a lump sum in the event that your are to suffer a traumatic event or a critical illness. With this one, for simplicity sake, the majority of claims are paid for heart attacks, cancer and strokes (although most policies do cover significantly more conditions than just these). In a nutshell, this is designed to cover medical expenses and short term loss of income due to a serious illness.
Total and permanent disablement cover
Total and permanent disablement (TPD) cover pays a lump sum should you become totally and permanently disabled through illness or injury. Becoming totally or permanently disabled can be a financial burden. It can prevent you from earning an income at a time when you have additional expenses to cover such as medical and/or rehabilitation costs. Your family also suffers from your disablement both financially and emotionally. TPD benefits help ease the financial concerns experienced at this difficult time.