Finding the right personal insurance
Another major consideration in looking for personal insurance is just what do you insure yourself for? There are a number of variations in the types of personal insurance that you can purchase and its easy to get hung up on the small print of this policy versus that policy. Essentially they do the same thing and the worst thing you can do is overcomplicate the process and end up with nothing. Remember, when it comes to insuring yourself & family, something is always better than nothing.
Although product providers have a whole raft of additional add-ons and small variations in how their products work there are essentially four main types of insurance product in the market. Life, Trauma, Total & Permanent Disability (TPD) and Income Protection. In my experience, the reason that the vast majority who don’t have insurance, don’t have it because they don’t understand what it does.
Types of Personal Insurance
An insurance policy is a contract between you and the provider that on the basis that you continue to pay your premiums, they will pay out your sum insured in the event of you experiencing an illness or death. It’s a long stretch to expect you to pay for a policy where you aren’t sure what you’re going to get. As a result, we’ve tried to run through the main types of personal insurance currently available and how these can be of use to you. |
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Life Insurance – Pure life insurance is the what most people think of when you talk about personal insurance. In the event of your death your family/estate receive a lump sum to allow them to continue to live in the same lifestyle they were accustomed to when you were around.
Trauma Insurance – Also known as Critical Illness insurance, pays out a lump sum in the event of you suffering from one of a list of specified illnesses. Critical illnesses are generally very serious illnesses that make you question whether you’ll be around in another 5 years and in my experience the payout received is used more to condense all the things you wanted to do in your life into this short period of time. Alternatively, if you want to use your payout for peace of mind to pay off debts, its entirely up to you. Its interesting to note that approx 8 out of 10 |
claims relate to the three core conditions that are
the basis for all trauma policies, heart attack,
cancer and stroke.
Income Protection – This pays out a percentage of
your income in the event of being unable to work
due to long term illness. The maximum you can
insure yourself for is usually up to 75% of your
income, insurers don’t want you to have exactly the
same level of income as when you stopped working
as there’s no incentive for you to go back to work.
Payments towards income protection polices are
generally tax deductible.
Total & Permanent Disability (TPD) Cover – This
typically pays out a lump sum in the event that you
are permanently unable to do your own job or if you
are unable to do 2 out of 5 activities of daily living. |
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