If you and your family have the right insurances, perhaps it was foresight and good planning that led you to take these policies out. But perhaps it ‘just happened’. To help you take a fresh, overall look at your personal insurances, here is a quick checklist of the most common policies you might need.
Checking your requirements
Income protection insurance
Income protection insurance can replace up to 75 per cent of your income through to age 65 if you are unable to work due to illness or accident. The regular amount you receive, the waiting period, and the benefit period all depend on the individual policy. And, of course, the premium you pay.
Consider: Does the policy pay an ‘agreed’ benefit or an ‘indemnity’ benefit? An ‘agreed’ policy generally isn’t affected if your income drops in the period before you make a claim.
Critical illness insurance
Critical illness or trauma insurance provides a lump sum payment after diagnosis of a serious medical condition such as cancer, stroke, heart attack, or a major organ transplant. It can pay your living expenses while you are ill and, hopefully, provide the money you need for successful treatment and recovery.
Consider: Is there a minimum survival period before you are eligible to claim a payout?
Totally and permanent disability (TPD) insurance
TPD insurance pays a lump sum if you are totally and permanently disabled as a result of illness or accident; it is often included with term life insurance and is sometimes included as an ‘add on’ to critical illness policies.
Consider: Does the occupation definition talk about ability to do one’s ‘own’ job, or ‘any’ occupation? When assessing your requirements, think about the special physical or knowledge skills you have and which are needed in your job.
Term life insurance
These policies pay out a lump sum upon death, although some allow death benefits to be paid out earlier if there is terminal illness and life expectancy is less than 12 months.
Consider: Should the life policy be held inside or outside of superannuation? Also, if you hold either TPD or trauma insurance within the same life policy, consider taking a ‘buy-back’ option: if you receive a trauma or TPD payout, this option generally allows you to restore the life cover to full value after 12 to 24 months, at an additional cost. Finally, check that your cover has guaranteed renewability, that is, the insurer must renew your policy each year up to a specified age, regardless of any changes to your health.
We all need general insurance to cover our homes and their contents, cars, boats, caravans and the other valuables we own. As Australia’s natural disasters have demonstrated, it pays to read the fine print and ask questions. It also pays to shop around.
How to use this checklist
Everyone’s insurance needs are personal so making the right insurance choice is often a complex decision. Do you need all four personal protection policies, for example: income, critical illness, TPD, and term life? Perhaps you do, but your decisions will depend on your age, cash flow, and state of health.
When you go through this list, you may find that in some important areas you are in fact self-insuring, that is, shouldering all the risk by yourself. To make sure that you have the policies you need, it is a good idea to discuss your insurance choices with us so that we can help you manage your overall risk management plan.