Life Insurance

It is important to ensure that you are not exposed to financial risk through accident or misfortune, which could jeopardise your present and future plans. In simple terms, if you cannot financially afford to lose something, then you should try to protect your exposure to that potential loss. Insurance can provide a cost-effective method of providing that protection.

Insurance is a critical element in Financial Planning. The problem is that many people do not understand the various types of insurance and how they should be applied to their specific needs. Essentially we can group insurance into two broad areas - 1.life insurance (income protection, term life etc.) and 2.general insurance (motor, business, home and contents, public liability etc)

Outlined below is a brief overview of the necessary elements of an insurance program, what they are and what they protect.

What is Income Protection ?

An income protection plan provides a regular income in the event of disablement through sickness or accident. Unlike life insurance, Income Protection provides an income stream when you are alive and unable to work. Income Protection is insuring your greatest asset, your ability to earn an income. As such, it allows you to continue paying the mortgage and bills as they come in.

Type of Life Insurance Plans ?

Term Insurance - only pays a benefit on the death of the life insured. Term Insurance is often referred to as temporary or rented insurance. This type of insurance carries no savings component. The relatively inexpensive premium rates are determined by age, sex, general health and smoking habits. 

Whole of Life or Endowment Insurance - otherwise known as permanent insurance, is generally taken out to cover an insurance need over a specified period or "Whole of Life". These policies accrue bonuses, which become guaranteed benefits upon death or policy maturity. 

Permanent Insurance - guarantees that at a given stage in the future, the insurance benefit plus bonuses are paid regardless of whether you live or die. 

Total & Permanent Disablement Insurance (TPD) / Disablement Lump Sum (DLS)- TPD or DLS is normally included as an option with life insurance. TPD or DLS provides a lump sum benefit to a life insured after a 6 month waiting period provided that they are unlikely to ever work again. There has been some criticism of this type of cover, based on these specific grounds for claim. Whilst someone may have had a life threatening illness like cancer, they may be able to work again, therefore they would be ineligible to claim. 

TPD is often included with superannuation in order to guarantee that an individual will receive a retirement lump sum even if they are unable to work. Unlike Income Protection, the payment is a one off lump sum.

Crisis Insurance - Crisis benefits are paid when a specific condition or event occurs eg. heart attack, cancer or stroke. Unlike TPD or Income Protection, a lump sum crisis benefit is paid immediately upon diagnosis of the defined condition. This benefit gives the insured a financial boost when it is needed most, at a time of crisis. It is not dependent upon any waiting period, and as such protects a client beyond that with which TPD covers