We have all probably heard about health insurance. Most Australians have a health insurance policy that helps with medical bills, which seem to be climbing every year. Likewise, almost everyone is familiar with car insurance; at a minimum, by law, each car must have compulsory third party insurance (CTP). Many choose comprehensive insurance so they are covered completely should they have a crash. And, it is likely people also know about home and contents insurance, so their home and their belongings can be replaced in the event of a house fire or burglary.
Leigh Johnston, a Financial Adviser with Vision Wealth Strategies, says all of these familiar insurances have an important role to play in protecting people’s lives from the chaos that can envelop them when unforeseen things can happen to their property or their health.
While these commonly recognised insurances are important, she says there are a range of insurances you may never have heard of that could be very helpful to keeping your financial life on-track even if trouble arises.
“At the core of this is a range of personal insurance – Life, Total and Permanent Disability (TPD), Trauma and Income Protection cover. For business owners, there is also Business Expense cover.”
#1 – Life Insurance
One of the more critical insurances people should consider, says Leigh, is Life Insurance.
“This is paid in the event of death, and whilst we never wish to imagine the death of a loved one, it is important to ensure the financial impact of their death is protected.”
“This can be for the repayment of a mortgage, additional capital for additional income provisions, and to ensure financial dependents such as non-working spouses and young children are protected.”
“Life Insurance provides a lump sum payment in the event of death. A lot of insurance policies have an inbuilt terminal illness benefit, whereby advance payment can be made in the event of terminal illness for medical expenses and to make the life of the insured more comfortable in their final days. This cover can be owned via Superannuation or bought personally.”
#2 – Total and Permanent Disability
While Life Insurance may cover us in the event of death or a terminal illness, sometimes we may need extra insurance coverage where a major illness or accident renders us unable to work. Leigh says the right kind of insurance to fill this need is Total and Permanent Disability (TPD) cover.
“This is paid in the event that a Total and Permanent Disability occurs that will prevent the insured from ever working again. There are different definitions, the main ones being any occupation and own occupation. This is also a lump sum payment and can be used for a variety of needs including the repayment of debt, medical expenses, and home modifications. This cover can be owned via Superannuation or purchased personally.”
#3 – Trauma Cover
Leigh explains that in some circumstances people may not necessarily be kept from ever working again but could experience a large amount of time unable to work due to a traumatic medical event or accident. Trauma cover is an insurance that can help with costs associated with these medical traumas until you are back on your feet.
“This is paid in the event the insured suffers from a number of insured medical traumas. It is a lump sum payment that can assist with financial commitments and covering medical expenses. Unlike Life Insurance and TPD coverage, this insurance coverage can only be owned personally.”
#4 – Income Protection
If you have a family or large financial commitments, it is normal to be concerned about what happens to the household bills if you were to be unable to work in your occupation due to medical complications. Income Protection Insurance can step into this void, says Leigh.
“This is paid in the event an insured is unable to work in their occupation due to a medical condition. The benefit is paid on a monthly basis and cover can vary dependent on waiting periods and benefit periods, as well as different styles of policies. This cover can be owned via Superannuation or personally, however, if owned personally, premiums paid will attract a tax deduction.”
#5 – Business Expense Cover
If you own a business, Leigh says you don’t have to sit by and watch your business sink in the event you can’t work. In conjunction with Income Protection Insurance, business owners can insure against business expenses should they be unable to work.
“This cover works in conjunction with Income Protection to ensure that fixed business expenses are covered whilst the life insured recuperates.”
Worker’s Compensation Not Reliable Cover
Leigh warns people not to assume worker’s compensation will help them in their hour of need. It simply isn’t designed to serve this purpose.
“If you are relying on the Workers’ Compensation scheme as adequate cover against becoming disabled, you may be compromising the financial wellbeing of your family. Workers’ compensation is designed to protect employers from employee workplace-related claims. It’s not an all-purpose income protection cover as most illnesses and injuries occur outside the workplace. And if you’re a sole trader or in a partnership, you are unlikely to even be covered by workers’ compensation.”
Here at Vision Wealth Strategies, we like to gain a strong understanding of our clients’ needs and objectives, and make recommendations that will achieve these and provide peace of mind offered by personal insurance cover. If you are interested in discussing this further, please contact our office on 02 4014 1999. You can also reach us here.
*Leigh Johnston is a representative of FNP Solutions Pty Ltd (ABN 87 156 409 531) trading as Vision Property & Finance Newcastle, a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL 236523