Personal Insurance – July 2012

Posted in Wealth
01/07/2012 Level One

An important factor of financial planning is managing future risks.

This is achieved by establishing appropriate personal insurances.

When assessing your need for personal insurance you should ask yourself the following questions:
  •  If I were to die suddenly would my family be able to afford to live?
  • If I had an accident at work and became permanently disabled would I need to modify my home and what would that cost?
  • Would I have enough money to cover medical expenses in the event I suffered a serious illness or injury?
  • If I was off work for an extended period of time, say 12 months, 5 years or never able to work again, would my family and I be able to pay the bills?

Would my family be able to pay for my funeral?

Personal insurances either provide lump sums or  income streams to assist with costs upon your untimely death, the onset of a serious illness, or in the event you meet with accident. Costs to factor in include:

  • Funeral expenses
  • A sum of money that can be invested to generate and income stream for your family to replace lost income
  • Medical expenses for serious illnesses i.e. chemotherapy
  • Travel expenses to access better doctors and treatment facilities
  • Home modification costs i.e. wheelchair ramps
  • Costs to employ childcare and housekeeping professionals in the event a parent passes away

Calculating your level of personal insurance can be difficult, as most of us rarely put a value on our lives. However, if you cannot honestly say that you would at any time have sufficient liquid assets or cash reserves to fund the above expenses, can you afford not to be insured?

There are several types of personal insurance that may be relevant to your circumstances.

You should review each one and assess whether each is suitable for you:

1. Term Life
Term Life insurance provides a lump sum benefit to the policy owner upon the life insured’s death.

This lump sum benefit can be used to repay a mortgage or other debts, fund educational costs for children, be invested to provide an income stream for their spouse, children and/or grandchildren.

2. Total & Permanent Disablement (TPD)
TPD provides a lump sum benefit if the person insured suffers an injury or illness that prevents them from working again.

This payment can be used to provide for medical costs associated with your disability, be invested to generate lost income, and be used to modify your home to make access and living easier.

3. Critical Illness (Trauma)
Trauma insurance provides a lump sum benefit on diagnosis of a defined specific event.

It is designed to help people recover from a crisis or traumatic event such as heart attack, stroke, cancer or other life-threatening condition.

4. Income Protection
Income Protection insurance provides the insured  person with an income stream if they are unable to work.

Income protection policies generally will cover 75% of the insured’s gross income and the benefit is payable to them up to a specified date from claim i.e. 2 years, 5 years or to age 65.

When you claim upon your income protection policy there is also a waiting period that you will need to serve. This is generally between 14 days and 180 days. The longer the waiting period, the cheaper your premium will be.

Longer waiting periods are suitable for people who have accumulated annual and long service leave benefits they can use before accessing their income protection.

Shorter waiting periods are most suitable for people without these accumulated leave benefits or for casual employees or contractors who are not entitled to leave benefits.

Premiums payable for the above personal insurances are not tax deductible with the exception of income protection. Where income protection premiums are tax deductible, any income protection benefit paid to you is taxed at your marginal tax rate.

You can possess personal insurance inside and outside of superannuation, however you must be mindful of the conditions of release associated with superannuation and ensure your insurance benefit can be accessed if required.


To find out more and assess your insurance needs or if you simply want to review whether your existing insurance is right for you please contact us.

[QUOTE] “Learn as if you were going to live forever. Live as if you were going to die tomorrow”.

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