Insuring your car, home or other possessions makes sense. So why do so few of us insure ourselves? If illness or injury stopped you from working for an extended period, could you keep paying your bills? Personal risk insurance gives you peace of mind that if the unexpected occurs, you and your family will be provided for.
What is personal risk insurance?
Personal risk insurance is an important way of ensuring your dependants will be financially supported in the event of serious illness, disability or death. If your ability to earn an income is affected, a personal risk insurance policy may enable you to maintain your current lifestyle and continue supporting those who depend on you.
Why do I need it?
While we recognise the emotional impact of events such as serious illness or death, the financial consequences can be equally devastating. If the unexpected did occur, having personal risk insurance can go a long way to helping you and your family meet your basic living expenses such as your mortgage, groceries, petrol or school fees. Depending on the event, you may also need to cover significant medical expenses, rehabilitation, modifications to your home or services to help maintain your lifestyle.
Types of personal risk insurance
There are four main types:
1. Life insurance
Life insurance can help provide financial assistance for a family if they lose the homemaker or breadwinner. In a business situation, life insurance can help protect against the loss of a key employee or business partner.
2. Total and Permanent Disability (TPD) Insurance
TPD is designed to meet one-off and ongoing living expenses, as well as cover special expenses such as medical and rehabilitation costs. To receive a TPD insurance benefit, you must satisfy specific criteria to establish the genuine nature and extent of the disability (this can vary between insurers).
3. Income protection insurance
Income protection insurance, also known as a salary continuance insurance, pays a monthly benefit of up to 75% of your pre-tax salary if you are disabled due to an illness or injury for longer than the nominated waiting period. Income protection benefits begin after a predetermined waiting period (eg. 30 days, 60 days or two years) that you nominate when you take out the cover. Generally, a longer waiting period means a lower premium however it also means you’ll have to wait longer to receive your first benefit payment. The policy will continue to pay the benefit for as long as you remain unable to work up to a maximum predetermined period. This can be a set timeframe such as two years or age based (eg. up to age 65).
4. Trauma insurance
Trauma insurance provides a lump sum payment if you suffer a serious, debilitating, medical condition (as specified in the policy you choose) such as heart attack, cancer or stroke. Trauma insurance is designed to help people cope with the financial impact of a traumatic event as they recuperate. Generally, you will receive the trauma benefit provided you survive for a set period after incurring the condition.
Ways our advisers can help you
Our financial advisers can help decode the various insurance policies and find the right mix of cover to suit your individual or family needs.
We can outline the pros and cons of waiting periods, different insurance providers and premiums.
Based on your current investment portfolio and earnings we can ensure your level of income is protected should the unexpected occur – so your family have financial security and you can recover in comfort.