We have all seen the ads, “Do something for your family, take out life insurance.” While the reasoning of these ads is sound, the ‘off-the-shelf’ premise that is portrayed in them is slightly unsettling.
When it comes to personal insurances there is no ‘one size fits all.’ As we discussed in our article “Personal insurance – a critical part of any life plan,” it is important to get the right amount of cover. You don’t want to be underinsured and, conversely, you don’t want to pay for insurance that is in excess of your needs and the needs of your family.
Where Advice Can Help
Just as Financial Advice can assist in calculating your levels of insurance, it also assists in choosing the most appropriate policy.
We have previously written about the different types of personal insurances available to you, this being: Life Insurance, Total and Permanent Disability, Income Protection and Trauma. But within each of these insurances there can be more sub types and options. Each of these can affect your possible payout at claim time.
We won’t go into each one but will take an example to show how not all personal insurances are the same.
Total and Permanent Disability (TPD)
TPD insurance pays you a lump sum if you are no longer able to work due to you becoming totally and permanently disabled. However, within this definition, there are two main subtypes of TPD insurance: Own Occupation and Any Occupation.
Own Occupation: You are no longer able to perform the duties of the job you currently do.
Any Occupation: You are no longer able to perform any job suitable to your experience, training or education.
Say you were an electrician and have an accident and lose the use of your hands. Under Own Occupation, you can no longer do the role you currently do. You would therefore meet the TPD definition. However, due to your training and experience, you still may be able to do other roles such as management or teaching. If you had an Any Occupation TPD policy, your claim is likely to be unsuccessful.
As you can see, simply ‘having’ insurance may not mean you are as covered as you think. Relying on off-the-shelf insurance, or even your default insurance in superannuation, may leave you financially exposed.
Like your investments and superannuation, your insurance should be reviewed by a professional to make sure you and your family are comprehensively covered should something happen to you. Schedule a no-obligation Discovery Chat with us to explore how professional advice can help you.
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The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. Louella Jorge is an Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429. This editorial does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information, you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser before you act.