Term Life pays a lump sum upon the death of the person insured, this provides protection to your family. In the event of the person’s death the lump sum will assist in paying off any outstanding debts such as a mortgage. If you have children, it is wise to ensure that there are extra funds left to invest to provide an income for your family. Most policies provide extra benefits, such as terminal illness benefit, where if you are diagnosed with a terminal illness, the amount insured is paid out. The cost of Term Life cover increases as you get older. However the more established your financial position is the less insurance you are likely to need. Therefore it’s possible to reduce your insurance levels over time to minimise cost but maintain protection for yourself and your family.
Total and Permanent Disability
An option with Term Life is to take an extension of Total and Permanent Disablement Insurance (TPD). TPD insurance provides a lump sum payment in the event of the person insured becoming totally and permanently disabled and unable to earn an income. It is designed to help meet one off costs, medical expenses, rehabilitation expenses and home alterations. TPD insurance is also available as a stand-alone product.
Trauma cover pays a lump sum in the event of an injury or illness as defined in the policy, for example cancer, heart attack or stroke. The payment can be used at your discretion and is generally used to cover medical bills, living expenses or rehabilitation costs. Trauma can be taken as a stand alone policy or attached to a life insurance policy. There are basic trauma policies and there are extended trauma policies that cover a greater variety of events. Some policies offer TPD as a definition of trauma, therefore this can provide cost savings. The average age of a trauma event is 42 and should form part of any complete insurance coverage.
This is probably the most crucial and flexible insurance. It is designed to replace your income if you are unable to work due to sickness or injury.
Your most valuable asset is the ability to produce an income and this must be protected.
Income Protection is an extremely flexible policy, where you can claim 75% of your Income under this type of Insurance if you are unable to work. You are able to choose the waiting period and the benefit period. The waiting period is how long you will wait before the insurance company begins to pay your claim. Variables are 14, 30, 60 and 90 days, 6, 12 and 24 months.
The benefit period is how long the insurance company will pay your monthly premium in the event of a claim. Variables are a 2 or 5 year benefit or to a specific age: 55, 60 or 65. Therefore it can be tailored to cover you once any accumulated sick and long service leave are used.
Importantly, the cost of income protection is fully tax deductible. The cost varies significantly based upon the waiting period, benefit period, amount of income insured and the insured occupation.