Life insurance explained
If insurance is sitting in your 'too-hard' basket, you're not alone – the majority of Australians are underinsured. And sadly, many people don't realise the real value of insurance until it's too late.
Having adequate life insurance cover provides you and your family with financial protection in the event of unexpected death, illness, injury, or a major health catastrophe (such as disablement, a heart attack or cancer).
You've worked too hard to let sickness or injury jeopardise everything you've achieved.
The main type of insurance cover are:
Life insurance cover
Life insurance cover provides your beneficiaries with a lump sum payment in the event of your death. As a general rule, you should aim to have enough cover to pay all large debts and provide your family or other dependants with a lump sum that can be invested to earn an income to replace your lost earnings.
Total and permanent disablement cover
Total and permanent disablement (TPD) cover pays a lump sum if you become totally and permanently disabled through illness or injury. Becoming totally or permanently disabled can be a financial burden because it can prevent you from earning an income at a time when you have additional expenses to cover such as medical and/or rehabilitation costs.
For more information see our TPD insurance guide.
Trauma (crisis) insurance cover
Trauma or crisis cover provides a lump sum payment to help you recover from a traumatic event such as a heart attack, cancer or stroke. This lump sum can be used to ease financial stress during a period of recuperation, when items such as home modifications and specialist medical attention may be required.
For more information see our Trauma insurance guide.
Your ability to earn an income is possibly your most valuable asset and one that should be protected.
Income protection insurance allows you to do just that; protect your income. So, in the event you are unable to work due to a sickness or an accident, an income protection policy can pay you generally up to 70 per cent of your salary.
You can hold this type of policy inside or outside super. If it's outside super, then the premiums are generally tax deductible. If it's inside super, then the super fund is able to claim a tax deduction on the premiums and this can reduce the cost of the cover.
For more information see our Income protection guide.