The 4 Different Types of Life Insurance: How They Can Protect You and Your Family
- Jarrod Boyd
At some point in your life, you’ll look back at all you’ve accomplished and all the assets you’ve accumulated over the past years. But if you want to look back and be proud, now is the time to make a change. Consider how you can best protect your loved ones and make sure they benefit from what you’ve worked so hard for, even after you’re gone.
It may be time to look into which type of life insurance cover applies to you. Life insurance cover can help prepare you for the unexpected events and circumstances in life.
To help you choose the most appropriate asset protection plan for yourself, let’s take a look at the 4 types of life insurance:
Income Protection
According to moneysmart.gov.au:
Income Protection (IP) can provide you with 85% of your pre-tax income for a specified time if you're unable to work due to partial or total disability.
This protection aims to replace your income based on your annual earnings 12 months prior to your illness or injury.
Keep in mind that this insurance was also formerly known as permanent health insurance (PHI).
Life Cover
Life cover is also known as ‘term life insurance’ or ‘death cover’.
Life cover provides a one-off payment (lump sum) when the individual with life cover passes away.
This lump sum will be given to those you have nominated as your beneficiaries – loved ones, your spouse, or your children.
Life cover is especially important if you have people that depend on you financially. An unexpected death is always unfortunate and emotional. However, with added financial stress, it can make it almost unbearable for the family left behind. Personal life cover is designed to ease some of this financial burden at a trying time.
Who Is Eligible to Get Life Cover?
Almost everyone is qualified to apply for a life cover policy.
That said, those who are under the age of 18 will need the consent and signature of their parents. Life cover is more flexible and forgiving when it comes to acquiring the benefits, which is what makes it so appealing to those who are eligible. So as long as you have all the necessary requirements, you or your legal beneficiaries are free to receive the appropriate amounts.
Total and Permanent Disability (TPD) Insurance
TPD Insurance is a crucial benefit for yourself and loved ones in the event you suffer from a permanent injury or illness, making it impossible to return to work.
TPD insurance will provide you with a financial safety net to help support you and your family, with the added benefit of covering the costs of medical and rehabilitation expenses. TPD insurance is similar to income protection; the difference is TPD insurance will cover you in the event you are never able to return to work while income protection helps support you while you recover.
When deciding if TPD insurance is right for you, it’s wise to consider your living expenses and your current savings. If you were unable to ever return to work, how much would you need to cover costs such as:
- Medical costs
- Everyday groceries and household bills
- Your mortgage and other debts
- Savings for retirement
Trauma Insurance
Similar to TPD insurance, Trauma Insurance can help support you and your family if you happen to suffer from a critical illness or serious injury. To decide if you need trauma insurance and how much, it’s important to assess what protection you have already. For instance, your life cover and/or TPD insurance will have covered a significant amount of the cost already so you may be able to be well supported by a lower Trauma Insurance cover.
As suggested by moneysmart.gov.au, if you speak to a financial adviser you may be able to seek assistance on whether or not you need trauma insurance – as well as how much cover is right for you.
Each life insurance cover offers unique benefits for various unexpected situations.
Whether you are going to pick between each or all of the options is completely up to you. However, it’s important to choose the covers that will best protect you and your family.
At Blue Financial, our financial advisers can help you choose the right personal insurances specific to you and your family. With over 30 years of experience, we are here to guide you to reach your financial goals. With life insurance advice from Blue Financial, you can protect what matters most in life.
Contact us today and let us discuss all your options.
General Advice Warning: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
