Insurance options explained

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Term Life Insurance

Term Life pays a lump sum upon the death of the life insured, this provides protection to your loved ones. In the event of the persons death the lump sum will assist in paying off any outstanding debts such as a mortgage. There should usually be excess over debts to assist your family especially if you have children.

Some policies provide extra benefits, such as terminal illness benefit, where if you are diagnosed with a terminal illness the amount insured is paid out.

The cost of Term Life cover increases as you get older, however the older and more established your financial position is the less insurance you are likely to need. Therefore it’s possible to reduce your insurance over time to minimise cost but maintain protection for yourself and your loved ones.

Total and Permanent Disablement Insurance (TPD)

TPD can be taken as a stand alone policy, but more commonly it is taken as an option with Term Life as an extension. TPD insurance provides a lump sum payment in the event of the life insured becoming totally and permanently disabled.

Trauma Insurance

Trauma policies pay a lump sum in the event of an injury or sickness as defined in the policy, for example cancer, heart attack, stroke. This can be taken as a stand alone policy, or attached to a life insurance policy.

There are basic trauma policies and there are extended trauma policies that cover a greater level of events (we only quote on the extended cover). Some policies offer TPD as a definition of trauma, therefore this can provide cost savings.

The average age of a trauma event is 42, therefore it’s costly, however it should form part of any complete insurance coverage. The important thing to remember is that with a trauma event you do not need as much cover as life insurance.

Income Protection

Probably the most crucial and flexible insurance as it is designed to replace your income if you are unable to work due to sickness or injury. Your most valuable asset is the ability to produce an income and this must be protected.

Some policies provide extra benefits, such as claims escalation option, day 1 accident benefit and business expenses benefit.

There are basic policies, which might be limiting in the time of a claim, and then there are extended, or plus policies which are preferred. Importantly, the cost of income protection is fully tax deductible. The cost varies significantly based upon the waiting period, benefit period, amount of income insured and the insured occupation.

Mortgage Protection

This is designed to provide you with a lump sum payment on death combined with an income stream should you be unable to work. The policies can even include redundancy cover. With reduced underwriting these policies can be implemented extremely quickly. We can provide a comparison of Mortgage Protection policies for you.