Removing the risk with insurance
How often do we say things like, “it will never happen to me” or “don’t worry, we’ll be ok if something goes wrong”?
When it comes to insurance it’s often very easy to justify to ourselves why we don’t need to do certain things, even when common sense tells us that without having proper risk protection measures in place we are leaving ourselves and our families potentially exposed.
Being under-insured is a risk you simply don’t want to take.
But it’s an alarming reality that many Australians are in exactly that position, especially when it comes to being protected for personal injury and death.
While most of us have basic life insurance and sometimes total and permanent disability insurance (TPD) included through our superannuation fund, it’s important to look at the level of cover you have and determine whether it would be sufficient to look after your needs.
For example, if you have TPD cover and are severely disabled due to ill health or an accident, would your level of cover be enough to pay the bills if you were unable to work, either on a temporary or permanent basis?
Worse still, what would happen to your dependents on your death if your life insurance payout was not enough to generate an income stream for your survivors that effectively replaced the family income you were able to provide while you were alive? It’s a scary thought, but unless that level of financial support is available your dependents may be put into a difficult position.
Is it really worth the risk?
The cost of medical assistance is often substantial, and restrictions on work and education can severely affect your capacity to earn a living. Also, changes to your lifestyle, including home and mobility, can be costly to manage, and the need for long-term care is generally very expensive.
In a family situation, if you are the main salary earner in the household, your partner and children will be significantly affected by any disruption to your income. When a primary income earner is disabled, the financial cost of care flows on because it is generally the other family members who need to take on the main support functions. This reduces their own capacity to engage in paid work.
The financial costs of disability can be high. One of the best ways to prepare for this cost is to transfer the risk to an insurance company.
Life insurance cover
In the event of your death, a life insurance lump sum will potentially be a lifeline to your family – to pay the mortgage repayments, other outstanding loans and even to generate a recurring income stream to cover everyday living costs. There are different types of policies around that can provide either straight life insurance, or a combination of protection for if you become critically ill, disabled or lose your life.
A good start is to assess your needs and to use an insurance quoting calculator to work out the best product for your needs.
TPD insurance cover
Total and permanent disablement insurance covers you for disabilities that permanently prevent you from ever working again. TPD is normally paid as a lump sum. Note that many TPD insurance policies require up to six months of total and permanent disability before paying a benefit. Payouts can provide you with a high percentage of your monthly income if you are unable to perform important income-producing duties of your regular occupation.
You could consider structuring your insurance payments so they come directly from your superannuation, which will make them much more tax effective.
Trauma insurance
Trauma insurance can help you cope financially with the effect that a medical trauma, such as a heart attack or cancer, can have on your life. Trauma insurance is normally paid as a lump sum and can be used to pay for changes to your lifestyle or for care that you may require because of the trauma.
Take action today
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If you prefer to talk with us to discuss your needs in more detail, call 1300 880 160