Most people would know of someone who has been impacted by a tragedy such as the unexpected death, disability or the diagnosis of a serious illness of a family member or friend. Those affected would also understand the financial impact an event like this can have on the lives of those around the victim.
The financial impact that may be associated with these events can be reduced or mitigated by having adequate insurance in place.
Insurance is often placed in the “too hard basket” as some people believe that it is too expensive, too complicated or is simply unnecessary.
Below, we outline the various insurance options, along with some indicative tables showing premiums for certain levels of cover.
How are premiums calculated?
Insurance premiums are determined largely by the amount of cover you require, your health, occupation, life expectancy, smoking status, age and gender. When applying for insurance you may be required to go through an underwriting process (depending on level of cover being applied for) that will assess how likely you are to make a claim on the policy and a premium will be set accordingly.
Life insurance
Life insurance pays a lump sum if the insured dies or is diagnosed with a terminal illness during the term of the insurance. The idea of life insurance is to protect dependents from a sudden loss of financial support. With adequate levels of cover, a family’s financial circumstances and lifestyle can continue to be maintained. Importantly, life insurance can be structured to pay the premium from an individual’s superannuation fund.
*All prices are approximate estimates, based on male, stepped premiums, non-smoker, admin worker, stand-alone cover, outside super.
Total and Permanent Disability (TPD)
TPD pays a lump sum in the event that the insured is unable to return to work due to illness or injury. TPD benefit payouts can be used to cover loss of income, medical expenses, ongoing medical support or any possible home renovations that may need to be done to cater for a disability. It may be appropriate (subject to age) to pay TPD from an individual’s superannuation fund.
*All prices are approximate estimates, based on male, stepped premiums, non-smoker, admin worker, any occupation, stand-alone cover, outside super.
Trauma insurance
Trauma insurance will provide a lump sum payment if you were to suffer or are diagnosed with a major medical illness such as cancer, stroke, cardiovascular disease, MS, blindness etc. Most working people rely on their ability to earn an income to provide for their family. If this ability was taken away due to a medical trauma the lump sum payment will provide you with the time to recover before having to return to work. It is generally not appropriate to house Trauma cover in an individual’s superannuation fund.
*All prices are approximate estimates, based on male, stepped premiums, non-smoker, admin worker, stand-alone cover, outside super.
Income protection
Income protection can replace up to 80% of your monthly income if you are permanently or temporarily unable to work because of illness or injury. This money can be used to pay the bills and stay on top of day-to-day living expenses during recovery. Premiums are tax deductible to the individual.
*All prices are approximate estimates, based on male, stepped premiums, non-smoker, 90 day waiting period, to age 65 benefit period, indemnity cover, outside super.
Conclusion
Insurance premiums can vary greatly, so it is strongly advisable to seek professional financial help before deciding on what product, level of cover and structuring will give you the most desirable outcome.
If you or someone you know would like to have a more detailed discussion with respect to your personal circumstances, please contact Eli Staub of our office on 9840 2200 or email estaub@hmh.com.au.
If you already have insurances in place it may be worthwhile reviewing them from both a cost and adequacy perspective.