Personal insurance cover is designed to make sure that you and your family are able to maintain a reasonable standard of living in the event that you are unable to work due to illness or injury, or in the event of your death. While insurance plans will vary, typically they will include any or a combination of death benefits, cover for total and permanent disability, plus options for income protection, salary continuance, and in some cases trauma or critical illness. Whether you have personal insurance cover in place or you are considering your options, always ensure that you understand the terms and conditions of your policy. There are many options available and inclusions can vary from policy to policy, this is why advice is vitally important. Also being aware of these common terms may help.
Life Insurance/Death Benefit Cover
This refers to the amount of money payable to the policy holder in the event of the death of the insured person.
Total and Permanent Disability insurance
Often called TPD cover, Total and Permanent Disability insurance refers to a lump sum payment that is provided where a person becomes totally and permanently disabled. Some policies provide a payment if you can’t work in any occupation and others provide a payment if you can’t work in your usual occupation due to the disability. TPD insurance is intended to help meet the costs of medical treatment, rehabilitation, debt repayments and the future cost of living incurred. Note that the definitions of TPD vary between insurance providers and policy types.
Income Protection/ Salary Continuance Insurance
These are forms of insurance that provide financial support where you cannot work due to illness or injury, generally via an income stream paid to you over a defined period of time. There is normally a waiting period and a benefit payment period.
Trauma/Critical Illness Insurance
Trauma and critical illness insurance provide a lump sum payment if a person is diagnosed with a condition or is required to undergo a medical procedure that is listed on the policy. This provides a safety net to cover medical expenses, rehabilitation and debts while you recover. This might include specific cancers, a heart attack or stroke.
The premium is the cost of insurance cover. This may be paid as a lump sum or by instalments.
Indexation provides an automatic increase in your level of cover each year to keep up with inflation. You can have the choice of stepped verses level premiums. If they are stepped premiums, you will find your premiums will increase over time.
Loadings and exclusions
In some cases an insurer will apply loadings or exclusions to a policy. A loading is an increase in the premium due to a pre-existing condition like a medical condition, or where there is a higher probability of a claim, for example, if you are a smoker. An exclusion is something that is excluded from cover under a policy, often due to its hazardous nature for example, a dangerous job or an extreme sport. You would not be able to make a claim for illness, injury or death resulting from an excluded activity.
This refers to the number of days that need to pass before the insurer will commence payment under an income protection claim. The waiting period may vary from one policy to the next and in some cases you can nominate for a longer waiting period in exchange for lower premiums on your policy.
The process of underwriting enables the insurer to assess the risk of a client and to determine the level and terms of any cover provided to them. Underwriting generally involves completing a detailed questionnaire, providing medical evidence and in some cases a medical examination. It is important to provide all of the relevant information. If you withhold information, this may have a negative outcome should you wish to eventually claim on your policy.
This is a document issued by an insurer when you purchase an insurance policy. It is used to verify its existence and for your record-keeping. The certificate includes the policy identification details, effective dates for the policy, type of insurance cover, and the amount of cover.
Our circumstances are constantly changing. If you would like to know more either read our insurance module, watch some of the videos below or contact us.
Insurance in Superannuation