When it comes to life insurance, there’s no shortage of misconceptions. A popular one is “I’m young and healthy so I don’t need life insurance”. The reality is that life insurance can come in handy at any age to any of us.
If you suffered an accident or became seriously ill and weren’t able to earn an income, how would you or your family cover the cost of living and meet those medical bills?
Among the hundreds of life insurance policies and plans Australians choose from every year, most can be categorised as one of four types: Life, Trauma, TPD and Income Protection.

Life Cover
Life Cover pays a predetermined amount of money when you die to whomever you have nominated as beneficiaries of your policy.
It’s designed to help clear the mortgage, to provide a lump sum to replace the income you would have earned in the future so that your family’s lifestyle can be maintained, to provide for your children’s education, to pay for your funeral and any other needs the family may have. It can also be used to provide for a disabled child/parent if you are no longer around.
It’s not just the breadwinner who needs insurance cover. If something were to happen to the stay-at-home partner, childcare could become a significant financial burden unless both partners have Life Cover and/or other relevant insurances.
People often assume that all these things will be taken care of automatically and that there will be enough money available. However, a full review of your needs will ensure that adequate cover relevant to your family needs is in place.
Also known as Term Life or Death Cover, you can think of it as your “peace of mind”.

Total and Permanent Disability
Often combined with Death Cover, Total and Permanent Disability (TPD) pays a lump sum to help cover the cost of medical bills, rehabilitation and debt repayments, including the mortgage if you become totally and permanently disabled. This includes costs incurred during medical treatment, as well as contributing to a future income stream.
It’s important to know exactly what you’re getting from your cover because the definition of total and permanent disability varies. A common definition is that you aren’t physically able to undertake your current occupation — for example, a surgeon who loses their sight can’t perform surgery. Or it means you can’t work in any field because of your condition — for example, an office worker with a back injury which does not allow them to sit or stand for any period of time.
Either way, TPD requires a serious level of disability with the prospect of never working again. For this reason, Trauma and Income Protection are often recommended alongside this cover because they allow a lower threshold of injury/illness when making a claim.

Trauma
Trauma insurance doesn’t wait for you to die, or for you to be totally and permanently disabled before it pays you a benefit. It pays a lump sum to support you if you have a major illness that will have a significant impact on your life. The payment can be used to help meet medical expenses, clear outstanding debt (the mortgage) or provide an income stream if you have to stop working. If you are renting, it can provide cash for a period of time determined in your discussions with your financial advisor.
Also known as critical illness cover or recovery insurance, it has clear benefits if you have a family history of certain medical conditions. It also protects against the unexpected, like cancer or heart attack, where the costs of specialists, scans and tests often far exceed private health rebates.
Critical medical issues can result in a massive scale of costs and time off work, ranging from ongoing therapy to special transportation and housing adjustments. Without the protection of Trauma insurance, these costs can be debilitating.

Income Protection
Income Protection insurance provides a replacement of your income if you are unable to work for a period of time because of injury or illness. This payment is generally up to 75% of your current income and is paid monthly, and begins after your selected Wait Period has passed. The timeframe over which the policy will replace lost income also varies, with some policies replacing your income for two years, while others provide for you until age 70 if you can never work again.

Bundling Brings Benefits
One of the benefits of bundled insurances is the comprehensive protection it provides. Each policy is designed to give protection for differing needs, which is why linking some of them together gives you cover for a wider range of risks.

Are you a business owner?
These four types of insurance can also be used to protect your business, its partners and its debt so the family or the business are not compromised should an unexpected event occur to the business owner(s).

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