Life insurance provides a lump sum payment to a beneficiary, third party or your estate in the event of death. In certain circumstances you may even be paid your benefit in advance if you have been diagnosed with a terminal illness.
The aim of having life cover is to provide for the financial needs of your family and to ensure an appropriate standard of living can be maintained in the event of your death.
Total and permanent disability (TPD)
Total and permanent disability insurance provides you with a lump sum payment in the event you suffer an illness or injury which renders you totally and permanently disabled and unable to ever work again.
In addition to providing for the financial needs of you and your family, TPD cover should also help pay for medical expenses as well as any costs associated with a change in your lifestyle.
The two definitions that can apply to a TPD policy, which will determine whether a benefit will be paid, are own occupation and any occupation.
Own occupation: You will receive your benefit if your total and permanent disability renders you unable to work again in your own or normal occupation.
Any occupation: You will receive your benefit if your total and permanent disability renders you unable to work again in any occupation for which you are reasonably suited by experience or education.
Trauma insurance provides you with a lump sum payment in the event you are diagnosed with one of a specific range of illnesses or injuries. The purpose of having trauma insurance is primarily to provide you with a benefit that can be used to pay for your medical expenses and supplement your income while you are recovering.
The conditions that are covered under a trauma policy vary between insurance providers, as do the definitions of those conditions. Examples of such medical illnesses covered by trauma include:
- Heart attack
- Lung and kidney disease
Income protection provides you with a regular source of income should you be unable to work for a period due to sickness or injury. You can generally insure for up to 75% of your current income (before tax).
This type of cover ensures that should you be unable to work, you will receive funds to replace your lost income. This benefit payment can then be used to provide for you and your family and ensure you are able to maintain your lifestyle.
With income protection cover you are required to nominate a waiting period and a benefit period as part of your policy. The waiting period is the time you must be off work due to illness or injury before you are eligible to make a claim. The benefit period is the maximum period of time benefits will be payable while you are unable to work.
The benefits paid from an income protection policy are seen as replacing your assessable income, and as such you will be entitled to claim a tax deduction on the premiums you pay. However it is also important to be aware that the payments you receive will be treated as assessable income and subject to tax at your marginal rates.
For more information, contact Priority1 to further discuss these options and to develop an insurance plan that is adequate, cost effective and appropriate for you.