Different life insurance products are designed to protect you from different events that can occur, so depending on what stage of life you’re in will determine the type of cover you need.
- Young professionals – you may only need to protect your lifestyle from the financial impact of an unexpected injury or illness – so you can keep paying the bills until you get back to work. You may also like to consider protecting against a serious illness or injury, including total and permanent disablement.
- Homeowners – if you’ve started taking on more debt, the impact of being out of work for a while – or forever – can have a much greater impact on your future. Life insurance may help you keep financial independence and keep up with debt repayments, even when you can’t keep the money coming in.
- New parents – if you choose to have a family, you’ll want to ensure that they can enjoy a comfortable future – whether or not you’re around. You should consider having enough insurance to cover your debts and future education costs, as well as providing for day-to-day expenses.
- Older families – as your kids get older, your regular expenses can increase, with things like school fees, activity costs or a mortgage on a larger house. You want to make sure you can continue to maintain your family’s lifestyle if illness or injury get in the way – and make sure they’re provided for through the critical school years if something should happen to you.
- Pre-retirees – as your children grow independent and you pay down your debts, you may need less cover than before. You might consider having just enough insurance to finalise debts and set you up for retirement, if illness or injury mean you have to end work early.
Of course everyone is different, and these are just examples. Let’s break down the different types of insurance available:
Total and Permanent Disability (TPD)
This type of cover pays a lump sum if you become disabled and can no longer work.
However it can get a little tricky with the two underlying definitions of “any occupation” and “own occupation”.
- Any occupation – you can claim if you are permanently disabled and cannot work in any occupation you are suited to by education, training, or experience.
- Own occupation – you can claim if you’re unable to work in your usual occupation or your chosen field of employment.
Own Occupation TPD cover is only available to certain occupation categories and not available under superannuation.
Total and Permanent Disability is as it seems, in the event you are totally and permanently disabled, this lump sum is intended to cover your debt, possibly future earnings, medical costs, or even home modifications in some instances. It is also one of the more difficult to claim due to the definitions, these can vary if the cover is held inside or outside of super or if it is personally owned.
Trauma, Crisis Recovery or Critical illness
One of the more complex life insurances available due to the varying components of waiting periods, benefit periods and definitions.
Generally this type of cover will provide a regular monthly payment of up to a certain percentage of your pre-disability income if you are unable to work due to illness or injury.
Although, just this year from 1 April 2020, Australian Prudential Regulation Authority (APRA) rolled out new rules which stop insurance companies from issuing any new Agreed value income protection policies, meaning the benefit value of your policy will be determined by your income at the time of your claim, rather than being set at the time you take out your policy.
When trying to work out your cover, it’s always best to speak to an expert. Our financial advisors are here to help and are happy to guide you on the policy that may be right for you. Book in an obligation free chat with one of our advisors today.