As humans, we like to believe that we’re invincible, but the reality is that unexpected things can happen to anyone at any time. One moment you’re enjoying life, and the next, you’re hit with a life-altering event that can leave you and your loved ones struggling to cope. That’s where personal insurance comes in. If you’re unfamiliar with insurance, let’s start unpacking it here.
Types of personal insurance
There are several types of personal insurance you can consider, such as health insurance, life insurance, disability insurance and income protection insurance, that can provide financial protection for you and protect you against the unexpected.
Life insurance
Life insurance is a policy that provides financial support to the beneficiaries in the event of the policyholder’s death. It helps protect loved ones by providing them with a lump sum payment or regular instalments of income.
Life insurance policies in Australia offer flexible options based on the individual’s needs, including level or stepped premiums, additional coverages and different payment options.
Total and permanent disability (TPD) insurance
TPD insurance provides you with financial assistance if you’re unable to work due to a permanent disability. This kind of personal insurance entitles you to receive a lump sum pay-out to meet daily living expenses, medical expenses and ongoing care in such instances.
TPD policies have varying degrees of coverage, and it is essential to understand the policy terms and features before signing up, but they can be a valuable addition to anyone living with permanent disabilities.
Income protection insurance
Income protection insurance provides financial support to policyholders who can’t work due to injury, illness, or disability. Your situation will depend on how your income protection policy will be structured, but it will only replace up to 70% of your income in the event that you’re unable to work. If there’s a known end date to your time off, such as a planned surgery for a broken limb that has an expected back-to-work date, then you’ll receive your payout as a lump sum. Otherwise, you’ll receive an ongoing monthly benefit while you’re off work.
How to know which type you need
Knowing what type and how much personal insurance you need can be a daunting task. However, there are a few things you can consider to help you determine what you need.
Firstly, think about your current financial situation and what you would want to happen if you were unable to work or if you pass away.
Consider the debts you have, the expenses you need to cover and how much financial support your loved ones would require if you were no longer around.
It’s also essential to consider your personal circumstances. Are you the sole breadwinner in your family, or do you have a partner who can support you financially? Do you have dependants who rely on you for financial support, or are you financially independent?
Your personal circumstances can have a significant impact on the type and amount of personal insurance you need.
What personal insurance mistakes should you avoid?
When applying for personal insurance, there are several mistakes you should avoid to ensure that you have the right coverage in place when you need it most.
One common mistake is failing to read and understand the policy terms and conditions. It’s essential to carefully review your policy and make sure that you understand what the insurance covers and what it excludes and any limitations that may apply.
This can help you avoid any surprises or unexpected expenses if you need to make a claim.
Another mistake to avoid is under-insuring yourself. While it can be tempting to opt for a lower coverage amount to save money on premiums, this can leave you vulnerable if you need to make a claim.
It’s always a good idea to seek the advice of a financial planner or insurance broker who can help you determine the most appropriate coverage for your needs.
The importance of personal insurance
While it might not feel fun to think about, personal insurance is an essential part of financial planning and provides protection and peace of mind for you and your loved ones.
By understanding the types of personal insurance available, knowing what you need, comparing insurance providers and avoiding common mistakes, you can ensure that you have the right coverage in place when you need it most.
Contact our team at Step Up today to speak to expert financial advisors about everything from personal insurance to estate planning.