Term Life Insurance
Term Life insurance is the most straight forward type of personal insurance – it pays you (in the event of terminal illness), or your nominated beneficiary (in the event of death). It can be used to service debt or provide a lump sum payment for you or someone important to you. The payout will be tax free if made to dependants such as your spouse and children under 25.
Income Protection insurance aims to protect usually up to 75% of your annual income (including superannuation contributions and other benefits) in the event that you are unable to work due to accident or illness. It is designed to cover you so you can maintain your day to day living expenses during your recover period.
Upon a successful claim, you are paid by the insurance company a monthly sum equivalent to 75% if your income – most policies pay up until age 65 or when you have recovered and are ale return to work – whatever comes sooner.
The types of policies can vary greatly and there are different waiting periods and benefit periods available, so it’s important to talk to an insurance expert to ensure you have the right policy. Importantly, Income Protection is usually tax deductible – this makes it one of the more popular types of personal insurance available today.
Trauma or sometimes called ‘crisis cover’ and is designed to provide a lump sum benefit in the event of the insured suffering a listed traumatic illness (heart attack, stroke, cancer are common conditions covered). The type and number of conditions defined as ‘traumatic illness’ differs depending on the insurance provider and policy, and it important to understand the events in which you will be covered when looking for the best policy in your situation.
TPD (Total and permanent Disability Insurance)
Total and Permanent Disability insurance is designed to cater for serious accidents and illnesses where due to the accident/ illnesses you have not worked for 6 months or more and it is more than likely that you will never return to work in either your own or any occupation. Upon successful claim you will be paid a lump sum amount that can be used to cover medical/rehabilitation expenses, household renovations and replacement of income.
Business expenses insurance is available to certain self-employed persons who wish to cover their business expenses should they be unable to work because of illness or injury. An ongoing income stream is paid by the insurance company and can reimburse up to 100% of approved business expenses.
Key Person Insurance
Key Person Insurance is a way to structure life insurance policies that are for business purposes in order to protect key people in a business. Premiums are usually tax deductible to a business, and benefits are paid to the business in the event of a successful claim.
Stepped or Level Premiums?
When looking for the right Personal Insurance (Life Insurance, Income Protection, Total and Permanent Disability and Trauma Insurance) policy within Australia, it is important to consider which premium structure you would like to choose. Stepped premiums are great in the short term, though will end up costing you a lot more in the longer term than level premiums. Its important to talk to an insurance expert about the best premium structure for you.
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