What if?
No one likes to think about the ‘what ifs’ – but unfortunately they do happen. Here are a few of the most common.
What if you injured your back playing sport and couldn’t work for six months?
What if you wre driving were home one night and another driver made sure you could never work again?
What if your spouse got cancer and died?
Not nice things but now think about the items that show up on your pay slip and bank statements. These would probably include your mortgage, groceries, school fees, money saved for holidays and superannuation for retirement. Your sick leave might cover them for one month and your annual leave for one more. Your holidays savings might cover you for another two months. Then what? Research shows that 60% of Australian families with dependants would run out of money within 12 months if the main income earner died. What if you lived and had to rely on Government income support? The disability pension is (at most) around $12,000 p.a.
Life Insurance and trauma insurance is a way to plan ahead so that an accident or an unexpected illness doesn’t mean financial hardship for you or your family when you are facing medical hardships. There are five basic types of insurance products, any combination of which can be used to suit your circumstances.
Income Cover
People often overlook what is in most cases their most valuable asset: their ability to earn future income! If you cannot live without your income for a prolonged period of time, you generally will need an income protection policy.
Income protection insurance pays up to 75% of your annual income, in monthly benefits, to cover your expenses should you become unable to work. Income protection allows you to cover your expenses and maintain your lifestyle as you concentrate on getting better.
What you can obtain coverage for varies widely, therefore it is important that you obtain a quality policy that is tailored to your occupation and employment situation. Importantly, the annual premium for income insurance is generally tax deductible.
Case Study
Ahmed is 45 years old and a company manager. Five years ago, Ahmed was diagnosed with Multiple Sclerosis. Due to this condition, he has been unable to earn his usual income.
His ongoing monthly Salary Protection payment meant that the ongoing household expenses his family relied upon could still be met.
Life Insurance
If you have people who depend on you being alive to produce income or you would like debt repaid in the event of your death, then you need a life insurance policy. Life insurance (also referred to as term insurance) provides a lump sum payment upon death or terminal illness of the life insured. The sum insured depends on your individual circumstances though as a general rule you should aim to have enough to repay all debts, and provide your family, or other dependants, with enough remaining money to live off at a reasonable standard.
Case Study
Darren was 28 years old and a builder with a young family when he fell from his ladder at work last year.
The payment from his Life Insurance meant his family did not have to struggle financially after he was gone.
Total and Permanent Disability (TPD)
Approximately 44,000 Australian suffer a stroke each year, with strokes being the leading cause of long-term disability in adults. Income Protection will help, but it is likely there will be large costs and medical expenses associated with your ongoing living in this condition.
Total and Permanent Disability cover is an added protection benefit often offered with life insurance policies. Again, a lump sum benefit is paid if the insured is disabled as defined in the policy. Generally speaking it means that because of a sickness or injury the insured is unable to work in their usual occupation or (alternatively) any occupation for which they are suited by training, education or experience. They may be paid where they have a permanent loss such as eye sight, or they have been absent from work for a certain time (usually 6 months or more) due to accident or illness and subsequently will not be able to return to work.
Case Study
Maja is 37 years old and an engineer. In 2002, Maja was diagnosed with kidney failure in early 2002. due to this condition, she has been unable to earn her usual income.
The payment from her Total & Permanent Disability insurance meant Maja could meet the gaps in her medical bills and provide for her family into the future.
Critical Illness
More than one in three males and close to one in four females will suffer from some form of cancer before they turn 75. If a person suffers a critical illness, life insurance won’t help, as the insured is still alive.
Critical illness (or trauma insurance) was introduced because medical advances increased survival rates after serous medical conditions like heart attack, cancer or stroke. Critical illness offers protection by providing a lump sum payment in the event you are diagnosed with one of a range of specified medical conditions. It allows you to concentrate on getting better rather than worrying about the financial hardships often created by such an event.
It helps by paying you a lump sum when you need it most, instead of using savings or adding to the mortgage. This type of insurance can be used to fund the costs of help around the house or even reduce the mortgage payments.
Case Study
Simon, an Accountant, was 42 years old when he suffered a mild heart attack. The Critical Illness payment allowed Simon to concentrate on recovering, knowing that the financial situation for both he and his family was fine.
The right type of insurance will depend on who you are and the reasons behind your need for protection. To ensure you get the advice most appropriate for you, contact us for a full analysis of your protection needs.