If you are a hard-working individual, who may even have a family to take care of, having personal insurance is one of the most vital investments you should consider making as part of your financial plan.
However, choosing the most appropriate type of personal insurance can become tricky and may require a bit of research.
Here is what you need to know about the 4 different types of insurance to help you decide which type would be most suited to you:
1. Life Insurance/Life Cover
Life insurance can be used to protect the financial security of your loved ones. This type of personal insurance provides a lump sum payment to your family in the event of your death.
By paying a monthly or annual premium, your family members can issue a claim in the event of your death.
The price and details of your life insurance/death cover policy will depend on these factors:
- medical history,
- family history, such as a history of disease,
- lifestyle (for example, if you’re a smoker),
- high-risk sports or hobbies (such as skydiving)
Life cover can provide financial support and protection to your financial dependents when they need it most.
2. Total and Permanent Disability Insurance (TPD)
TPD insurance can cover your income in the event you become permanently injured or ill, making it impossible for you to return to work.
This insurance type can support you and your family by providing a financial safety net and covering large medical and rehabilitation costs – as well as normal living costs while you can no longer receive a salary.
The main benefit of this type of insurance is that the insurance company pays out the policy value to the insured individual in the case of a disability or injury. A disadvantage is that the payout is usually a set amount of money and can have a high premium.
However, a financial planner can help you to select the right insurance policy to save you money and bring you peace of mind.
It’s important, before purchasing TPD insurance and deciding how much you will need, consider the following ongoing expenses you may need to save – even if you can no longer work:
- living expenses for you and your family
- repaying debts such as a mortgage or credit card
- medical and rehabilitation costs
- savings you want for retirement
3. Income Protection Insurance
This type of insurance pays up to 70% of your regular pre-tax income in the event you become seriously ill or injured and unable to work for a period of time.
Whilst you are focusing on your recovery, income protection insurance can help by eliminating the financial stress of hefty hospital bills and even your everyday expenses.
If you’re not sure whether income protection insurance would be suited to you, consider the following:
- Do you have enough savings or a large enough emergency fund that would allow you to get by for more than a few months without your regular income?
- Do you have ongoing financial commitments such as rent, a mortgage, or a business?
- Do you have financial dependents who rely on your income? Kids or your partner?
You may even want to consider unpacking these questions with a financial adviser, who can help you navigate your financial situation and help you make an informed decision.
4. Trauma Insurance
If in the tragic circumstance you were to fall critically ill or acquire a serious injury, making it extremely difficult to continue working, trauma insurance can support you and your family by covering any medical and rehabilitation costs.
These costs could include physical therapy, occupational therapy or even help you pay off remaining debts that you wouldn’t be able to keep up with if you weren’t working such as a mortgage.
Trauma insurance can provide you with one less thing to worry about during such a difficult time for not only yourself but also your loved ones.
It’s important to keep in mind that not all medical conditions are covered and there can be some exclusions within certain trauma insurance policies that you need to be aware of. Consider comparing policies by checking the following:
- The critical illnesses and serious injuries covered
- What are the exclusions
- The waiting periods before you can claim
- Any limits on cover
- Premiums – now and in the future
- Check if the policy will cover you for claims associated with COVID-19
No matter how careful you are, accidents can happen and unfortunate illnesses are difficult to prepare for. Therefore, a reasonable level of insurance and wealth protection plan can be essential to keep your finances secure, protecting you and your family’s financial future.
As mentioned, the right life insurance can protect you from various risks, and the better you understand the cost and the value of your coverage, the better you will save yourself from unforeseen events.
Seek personal insurance advice in Adelaide from Novo Wealth
Novo Wealth is a financial planning agency offering ethical financial advice solutions for our clients in Adelaide and Australia. Our financial planner has over 25 years of experience in financial planning and is passionate about helping our clients live their best life.
Talk to a financial planner in Adelaide today and enjoy the benefits later.
IMPORTANT; This information is general in nature only. It does not take into account your individual circumstances. We recommend that you seek professional advice before making any investment decision.