Insurance is something that many people all over the world should think about. Insurance covers a wide range of areas that can be insured (car, house, health, landlords, contents, life/death, total and permanent disablement (TPD), income protection, trauma, and professional indemnity). As financial advisers, we tend to focus on life, income protection, trauma, and TPD coverage to help our clients ensure a relatively stress-free life should the unthinkable occur.
But what is the point of having personal insurance? What kinds of life events do they cover? Why is it so pricey? Why? Why, Why, Why? I am frequently astounded by how people would not consider backing out of their driveway without having their car insured but are hesitant to insure their most valuable asset: their life and ability to earn an income.
Let us begin at the beginning. Let’s examine what these insurance policies cover and why we might need them.
Life Insurance
This is the most self-explanatory insurance because it pays out a lump sum to your beneficiaries if you die. This insurance can help you pay off debts for your surviving family members (such as a mortgage) and provide for your children’s education and care. The beneficiaries decide how to use the funds, but it is beneficial in reducing stress after a death in the family.
Critical Illness or Crisis Cover
This insurance is based on the occurrence of a specific event, such as a stroke, heart attack, or cancer diagnosis. It provides a lump sum payment to assist with medical care and financial burdens that may arise due to the illness.
Income Protection
This insurance is designed to pay a regular income if the insured cannot work due to illness or injury. Payments can be up to 75% of your pre-incident income and will be made for the agreed-upon period (usually two years or to age 65). Waiting periods are familiar with this coverage and can be used to cut costs. If you cannot have a consistent source of income, much of the financial stress is caused by ongoing living expenses.
Total & Permanent Disablement (TPD)
This coverage is helpful if an illness or injury prevents you from working by paying a lump sum at the time of claim. It can help you make your home more suitable after the incident and fund your and your family’s ongoing care needs. The majority of TPD claims are paid out as a result of significant accidents.
Cost Involved
Insurance costs vary depending on the individual and the amount of coverage required, occupation, waiting periods, and various other factors. Before deciding on the right insurance for you and your family, it is best to obtain quotes from several sources and investigate their coverage (lessfewerfewerons).
Insurance premiums may be subject to loadings (this can make it a little more costly). A smoking history, being overweight or having high blood pressure are reasons a loading may apply. If your circumstances change in this area, it is best to notify your insurance provider so that a re-assessment can be performed, which may result in lower premiums as your health improves.
Some insurance costs can be paid from your superannuation account, but this has the disadvantage of eroding your retirement savings.
Be wary of online or media advertisements that promote low-cost insurance by ‘just picking up the phone.’ Cheaper is not always better, and there are several significant differences between this type of coverage and that obtained through a financial adviser.
Finding the right coverage while staying within your budget can be difficult. Talk to your financial advisor if you want to learn more about your insurance options.
Why is insurance important?
Insurance is necessary to ensure that an accident, illness, or other calamity does not hurt your financial situation. As advisers, we have seen the positive effects that insurance can have on our clients in the unfortunate event of a claim. We want to ensure that everyone has access to high-quality insurance coverage appropriate for them.
Not sure if you have the proper insurance coverage for your situation? Not sure where to begin? Make an appointment with an insurance adviser today to discuss your insurance requirements. Insurance is a necessary evil that can provide peace of mind for a reasonable price.
