Bill Gates supposedly predicted the pandemic in 2015, but he was not able to foretell the severity of the situation.1 Not even Nostradamus can do such a thing. The unpredictability of things should compel us to prepare for the future.
The best way to protect your wealth, your income and your family is by seeking the professional advice of a qualified financial adviser. Doing so will give you some peace of mind, knowing you are on the right path to financial security and living a comfortable lifestyle.
If you are unsure about whether you have the right personal insurance cover and how your insurance can help during an illness or injury, then this article is for you!
Common Types of Personal Insurance
Most people don’t like to think about getting insurance cover as it means facing the reality that something bad can potentially happen to you. However, personal insurance is just as important (or even more important) as having car insurance or content insurance for your personal belongings.
Part of every holistic financial plan is personal insurance – as it is there to protect your wealth and during prolonged periods of illness or injury, especially if you cannot work and earn an income. Whilst you may question the necessity of insurance, the unfortunate truth is that 60% of Australians, will need to take a prolonged break from work due to illness or injury at some point in their lives.2
There are four main insurances you would hold as part of a comprehensive insurance plan: life insurance, total and permanent disability insurance, trauma insurance and income protection insurance.
Here, we will cover each type of insurance and explain how insurance can help during illness or injury to keep you financially secure.
Life insurance typically provides a lump-sum benefit payment to your beneficiaries at the time of your death.
However, many life insurance providers offer an Early Payment Benefit in the case where you’re diagnosed with a Terminal Illness and have less than twelve months to live.
This payment can improve your quality of life up until your passing and also provide financial support to you and your family straight away rather than wait.
Total and Permanent Disability Insurance
Total and Permanent Disability (TPD) insurance provides a lump sum payment if you become totally and permanently disabled due to sickness or injury, and are unable to work again.
When applying for your TPD insurance cover, you must nominate what definition of TPD you would need to meet to receive a benefit payment. There are typically three definitions:
- Own occupation: unable to work again in the job you were working in before your disability.
- Any occupation: unable to ever work again in any job suited to your education, training or experience.
- Activities of Daily Living: unable to perform activities that are part of daily life, like bathing or feeding yourself.
TPD policy owners tend to purchase this cover with the intention of it being used to fund medical treatment, rehabilitation, home nursing and home modifications.
Trauma Insurance (aka Critical Illness Insurance)
With Trauma Insurance, aka Crisis Recovery, you’re paid a lump sum if you are diagnosed with a critical illness. These are medically defined as part of your Product Disclosure Statement (PDS) and can include cancer, heart attack and stroke, plus many other serious illnesses and injuries, or even serious medical procedures.
Trauma policy owners tend to purchase this cover with the intention of it being used to alleviate the financial burden of the medical condition and provide you and your family with peace of mind while you recover from your illness or injury.
Income Protection Insurance
Income Protection helps to protect your greatest asset – your ability to earn an income. If you are unable to work due to a sickness or disability for a prolonged period of time, Income Protection can provide you with a percentage of your income as a monthly benefit to help manage your ongoing living expenses and financial obligations.
The Basics of Income Protection:
- Waiting periods: can span from 30 days to 2 years.
- Benefit Periods: can be a fixed-term of two or five years, or up to a specific age (maximum age is 65).
- Benefit Amount: you can apply for up to 70% of your pre-tax income – plus Super Guarantee which is paid directly to your nominated super fund.
Income Protection policy owners tend to purchase this cover with the intention of it being used to cover living costs and household expenses like mortgage repayments, groceries and utility bills, to support your family (school fees, for instance) or for rehabilitation services to help you recover.
Owning Personal Insurance via Superannuation
Life, TPD and Income Protection insurances can be held inside and/or outside your superannuation fund. Owning the cover inside your super means it is less likely to affect your cash flow as premiums are paid by your superannuation, however, there can be limitations to the cover. Insurance outside of your superannuation fund will need to be absorbed by your cash flow but can come with a greater choice of cover and other benefits.
Trauma insurance can only be held personally outside of Superannuation.
Insurance Gives You Peace of Mind
We can never predict the future. It is essential that we have some financial protection to cover us during our time of need and a comprehensive insurance plan can provide that peace of mind.
Always remember to thoroughly read your Insurance policy Policy Disclosure Statement to ensure you understand your policy’s features, benefits, fees, risks and the complaints handling procedure before proceeding with any application.
If you want to understand more about personal insurance and how you can protect yourself and your family should the unexpected occur, you can speak with an experienced financial adviser at Central Coast Financial Planning Group. We understand that it can be overwhelming with so many options to choose from, but do not fear as we have the knowledge and experience to create a cost-effective plan with adequate cover for you and your family’s needs. Get started today by phoning our office or booking online to secure your complimentary initial meeting.
- RI Advice Group Pty Ltd “Life protection solutions: How they fit together – to cover you and those who depend on you”
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.