How would you pay your mortgage and meet your other living expenses if your income stopped? Think about the risks that you face in everyday life. Some risks cannot be removed entirely, but we can mitigate their impact through personal life insurance products. If you do not have adequate insurance, an unforeseen death or illness could have severe consequences for you and/or your family. Here we discuss the four main types of life insurance.
Life
Life insurance is designed to provide a lump sum payment to your family or nominated beneficiary in the event of your death, or in other cases, it can provide an early payment if you are diagnosed with a terminal illness. The payment can allow your family to stay in their home, help provide for your children’s education, and give your spouse financial security and the ability to maintain their lifestyle.
Total and Permanent Disability (TPD)
TPD is designed to provide you with a lump sum payment if you are no longer able to work due to an injury or illness. The payment should provide you with financial security to support your living expenses if the level of cover if correct. There are two types of TPD insurance:
- Own occupation
Own occupation will provide a lump sum if you can no longer work in your own field of work in which you are trained and specialise.
- Any occupation
Any occupation, which generally costs less, will only provide you with a lump sum if you can no longer work in any occupation that might be suitable based on your training, education and previous employment.
Critical Illness (CI)
CI is designed to provide you with a lump sum payment if you become critically ill and require extensive medical treatment for example cancer, a heart condition, stroke or major head injury. The lump sum will allow you to access high quality medical treatment and cover rehabilitation costs, so you can focus on recovering rather than worrying about your finances.
Income Protection (IP)
IP is designed to supplement your income if you are unable to work because of an illness or injury. IP policies generally cover up to 70% of your gross wage which helps you financially maintain your existing lifestyle and provide for your family while you recover. Two main features of IP are the waiting period and the benefit period.
- Waiting period
This is the amount of time you wait before payments start. Waiting periods are generally between 14 days and 2 years. The longer the waiting period, the cheaper the policy.
- Benefit period
This is how long the payments last. Benefit periods range from one year up to 10 years, or up to a specific age, such as age 65. The longer the benefit period, the more expensive the policy. However, your income will be protected for longer.
Finding the right insurance cover for your situation and budget can be difficult and confusing. If you already have personal insurances in place, it is important that you hold the correct types and levels of cover. Elevate Wealth can help ensure you have the right insurances in place to protect you and your family’s lifestyle and assets.
Information in this article is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.
