Risk Management
There are two guaranteed things in life – death and taxes. How would you or your family survive if the main income earner were to be injured or become ill and unable to work? What if you passed away, would your family be able to meet all the bills, mortgage repayments and have a sufficient income to support themselves? To ensure you and your family are financially protected against any unexpected illness or injury you should consider some form of personal risk insurance.
What is personal risk insurance?
Protecting yourself and your family financially should be a necessity, not a luxury. Unfortunately many Australian consumers insure their tangible assets like their cars, house and contents (as shown in the image below) but forget about the value of their life or income. The common Australian saying “I’ll be right, it won’t happen to me” is often used when talking about personal risk insurance. The irony is without an income and ability to continue to earn an income, these tangible assets may be difficult to hold onto.
No-one can eliminate the devastating emotional impact of serious illness, disability or death, but if you or your family have to deal with financial problems on top of the grief otherwise associated with the traumatic events, the situation can be even more difficult to manage. Having money available when you need it most is what makes insurance so valuable.
There are four main types of personal insurance:
- Life insurance: a cash lump sum payable on your death to help support your family or dependants.
- Total and permanent disability insurance (TPD): a cash lump sum to help support you and your dependants if you are totally and permanently disabled due to illness or injury.
- Income protection insurance: a monthly income stream to help support you and your dependants if you are sick or injured and can’t work.
- Trauma insurance: a cash lump sum to help support you and your dependants if you suffer a specified major medical condition.
The cost of premiums
The cost of personal insurance premiums is generally related to the level of risk associated with the insured. This can include factors such as:
- Your age
- The state of your health
- If you are a smoker
- Your occupation
- The type of recreational activities you participate in.
Other factors that may affect the cost of premiums are the type of benefit being paid and the level of extra cover you have opted to take out eg. for specific injuries, events or illnesses.
Before taking out personal insurance, consider the policy features carefully because the exact circumstances in which a benefit is payable can vary. A cheaper premium may indicate more restrictive conditions on claiming, particularly with policies relating to payment on illness or injury.
Contact an adviser today. Why put it off any longer?