Personal insurance – a critical part of any life plan.
Just like building up your wealth is important, protecting it is equally as important. Often we get too hung up on making wealth for us and our family, that we overlook what gives us the ability to make that wealth. What is comes down to is our ability to work.
When I started off in planning many years ago I used to talk to clients about a money tree. “If you had a tree that gave you $75,000 a year wouldn’t you insure it?” I think I have moved on from money trees, but it is a very good analogy.
Why wouldn’t you insure your ability to create wealth and the ability to provide for your family?
There are four types of personal insurance, each providing benefits under different circumstances.
This pays a lump sum amount to your nominated beneficiaries or your estate. This Insurance will pay in the event of death or terminal illness.
The lump sum is usually used to pay off existing debts such as a mortgage, provide an income to your dependants or any other financial support.
Total and Permanent Disability
This pays a lump sum if you suffer an illness or injury that leaves you permanently disabled and unable to get work. It will also cover you if you are a homemaker and cannot perform domestic duties. This money may be used to make modifications to your home, medical expenses or provide financial support.
Will pay you a lump sum amount should you suffer a significant illness or injury. Typically such illness or injury may need medical treatment, time off work and changes in your lifestyle. This amount may be used to cover any out of pocket medical expenses or provide a source of income as you recuperate.
This insurance will pay you a monthly benefit should you be unable to work due to illness or injury. This amount, usually about 75% of your income, will allow you to meet your living expenses for yourself and your dependents.
Each personal insurance covers something specific, however they work together to provide holistic financial protection for you and your loved ones.
Where Advice Can Help
Seeking the right financial advice is important when establishing these insurances as there are many elements that need to be addressed:
The correct amount insured.
You don’t want to suffer illness, injury or death only for you or your dependants to find out that your insurance levels do not need your needs. Conversely, you don’t want to be over insured and paying for insurance that you don’t need.
Your policy can be owned by yourself, an elected person your superannuation fund. Life, TPD and Income protection insurance can be owned (and therefore paid) by your superannuation fund. However the ownership of an insurance policy has other implications. Taxation of benefits, policy definitions and your final retirement nest egg are all important considerations.
Not all insurance policies are the same. Each may have subtle differences as to “Trauma Events” or what constitutes terminal illness.
Options and Extras
The multiple options and myriad of extras that are offered on personal insurance is quite overwhelming. How these options work and what extras would be suitable for you and your family can make a big difference at claim time.
Even if you have insurances in place, it is just as important to keep them regularly reviewed, as we wrote about in our blog post.
Personal Insurances can be quite a complex area. Putting together the best strategy that gives you and your loved ones the best outcome needs the advice of a professional. 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.