You may or may not know that financial planners will help you out with personal insurance and not general insurance.
General insurance is your car, house, etc.
Personal insurance is your Life, Total and Permanent Disability (TPD), Trauma and Income Protection.
What is Life insurance?
Sometimes referred to as death insurance, this is a lump sum payment that is paid out to your estate in the event of your death. Some policies will pay out when given a terminal illness diagnosis.
What is Total and Permanent Disability (TPD) insurance?
TPD is a lump sum payment that is paid out when you are declared unfit for work and not expected to return to work.
There are 2 different “definitions” of occupation ratings for TPD.
Any Occupation – You are unable to work in a job that your education, training, and experience are suited to.
Own Occupation – You are unable to work in a job that you are currently working in.
What is Trauma insurance?
This insurance goes by a couple of different names, like critical illness and trauma.
Trauma is a lump sum payment that you receive if you experience a life-changing illness or injury. For example heart attack, cancer, stroke, loss of limb, or loss of senses.
Some policies will pay a benefit depending on the severity. For example, a loss of a finger wouldn’t pay as much as a loss of an arm.
Also available is childhood trauma. Can read more in my previous blog – Insurance for my kids is actually selfishly for me
What is Income Protection insurance?
Income protection is an ongoing, generally monthly, payment that covers up to 70% of your income if you suffer an injury or illness that stops you from working.
Income Protection has waiting periods (how long you have to be off work before you can claim), benefit periods (How long the benefit will be paid), Occupation rating (Any or Own like TPD), Agreed or Indemnity (Agreed value policies are no longer available).
There are other insurances available, for example, key person, and buy/sell insurance but these are the top 4. Generally speaking, almost everyone should have some form of all 4 insurance.
When a financial planner recommends and helps implement, these insurances we receive a commission from the insurance company, similar to a mortgage broker getting a commission from a bank. This means we generally don’t need to charge any additional fees when helping with insurance as the insurance company foots the bill for you.
You can fund your insurance from super or personal money. There are reasons to do a mix of both for different insurances. I will cover that in more detail in another blog when I talk about Stepped and Level insurance premiums too.
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