Personal insurance is something many people don’t want to think about, yet we all know someone who has been seriously affected by some dreaded disease or a terrible accident.
It could have been us. Insurance can protect us and our families from unexpected events life throws at us.
Major events can be a trigger to getting insurance cover – taking an overseas trip (someone is always getting into trouble in Bali), or a trip down the aisle, acquiring our first home and mortgage or when babies start to arrive.
Once we are responsible for other people we must consider the consequences if we were unable to fulfil those responsibilities.
Who is financially dependent on us and our income - our partner, our children? What would life be like for them if we were no longer here?
Could living expenses and mortgage payments be met? Would our family struggle and have to sell their home? Could our children still be educated in the schools of our choice? Would compromises have to be made? If our death would seriously impact our family we need life insurance.
What if we are hit by the proverbial bus but don’t die? This could be a fate worse than death financially, if we are ‘totally and permanently disabled’ and cannot work again.
Our spouse’s earning ability may also be impacted if they need to be our full-time carer. If disablement would make us financially vulnerable total and permanent disability (TPD) insurance can help.
Trauma insurance, or critical illness cover, pays a lump sum if we suffer a “defined medical event”. These include cancer, heart disease, stroke, and neurological conditions such as multiple sclerosis, motor neuron disease and Parkinson’s.
It also covers physical trauma such as serious head injuries, and loss of limbs, hearing or sight.
The number of illnesses covered and the benefit amounts paid, differ between insurance companies. It can be confusing trying to differentiate between the providers of this cover.
A fourth type of cover we should consider is income protection insurance. This provides a monthly benefit should sickness or injury prevent us from working in our usual occupation. The maximum monthly benefit is 75 per cent of our usual monthly income.
We can vary the ‘waiting periods’ (30 or 90 days or longer) depending on the amount of sick and unused leave we have accrued in our employment, and benefit periods – two or five years, or to age 65.
Advice from financial planners can help us navigate through the different insurance providers and the varying definitions they use.