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Personal Insurance to Help Protect Your Financial Future

Russell Cain Fact Checked Updated: 21 May 2020

Personal insurance is a key type of insurance held by most Australian families. If you’re wondering whether personal life insurance is worth it, ask yourself what would be the financial consequences of an illness or injury that left you unable to work for a long time. How would your family survive if you suddenly passed away or got diagnosed with a terminal illness?

There are different personal insurance types, each one’s benefit payment intended for a specific purpose. For example, covering part of your income, paying for medical expenses and outstanding debts or ensuring your loved ones are financially supported when you’re no longer there.

Whether you need personal insurance coverage is dependent on your specific circumstances and requirements. However, most people do need some form of insurance.

Defining personal insurance in Australia

Personal insurance offers protection against the risk of death, injury or illness depending on the specific type of cover you buy, including life insurance, TPD insurance, income protection insurance and trauma insurance. In Australia, personal life insurance is usually purchased for the protection of the individual and their family.

People generally buy personal life insurance to protect:

Types of personal insurance

  1. Life Insurance: Term life insurance provides a lump sum benefit designed for your loved onesprojection, should you pass away or be diagnosed with a terminal illness.
  2. TPD Insurance: Total and permanent disability cover pays a lump sum amount if you became totally and permanently disabled and are unlikely ever to work again.
  3. Trauma Insurance: Critical illness cover provides a lump sum benefit should you suffer from any of the traumatic medical event listed in the insurers PDS.
  4. Income Protection Insurance: Provides a monthly benefit of up to 75% of your regular income should you be unable to work for a specified period due to a sickness or accident.

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Personal insurance typePayment conditionsUsually used for
Life CoverUpon your death or diagnosis of a terminal illness where the doctor has given you less than 12 months to live.Personal loans, mortgage, funeral and to provide for your loved ones.
TPD InsuranceUsually when a medical professional has stated that you are unlikely ever to work again.Paying medical expenses and helping with lifestyle adjustments.
Trauma CoverList of specified medical conditions provided in your policy, for example, cancer, heart attacks, and paralysis.Covering medical costs and pay debts during an emotional and financially difficult time.
Income Protection InsuranceDoctor confirms you must stop working for a certain amount of time because of an illness or injury.Day-to-day living expenses, children’s school fees, fuel bills, mortgages etc.

Personal insurance for work

It’s not just about protecting your yourself and your family; it’s also about protecting your lifestyle. If you can’t work for a while, or ever again, personal life cover will act as your financial backup plan.

Income protection insurance is one of the most relevant types of personal insurance for sole traders, small business owners and those who are self-employed. It can replace up to 75% of your income if you can’t work because of sickness or injury.

Business expenses insurance helps cover fixed business expenses like rent, electricity and non-income producing staff wages when you can’t work because of sickness or injury.

If you run a business, you can combine these two types of policies to cover your work and personal expenses. And potentially reduce your tax bill.

How much cover do you need?

Typically, when answering this question, you should consider your current and future financial needs such as clearing debts, replacing income and covering expenses.  Everyone’s insurance requirements are different. It is essential that you consider whether you have enough funds to cover the following.

Your personal insurance coverage checklist

Don’t forget about the additional and often hidden costs of sickness and injury. When considering the extra costs associated with a serious claim, it is vital for you to remember there may be once-off costs and others may be ongoing costs, so be sure to consider:

How much does personal life insurance cost?

The average cost a personal insurance policy depends on a variety of factors, including your age, gender, smoking status, and overall health. The premium you’ll pay will also be determined by the life insurance company you choose and whether you pay monthly or annually, as there is generally a discount when paying premiums yearly.

How to get personal insurance in Australia

  1. Compare quotes: Whether you compare quotes online, over the phone, or with an insurance broker it’s always best to shop around before committing to a personal life insurance policy. Ensure you understand what is and what is not covered by comparing premiums, features and benefits side-by-side.
  2. Direct is not always best: Dealing directly with an insurer does not always mean you’ll get cheaper rates. In fact, many life insurance brokers and online comparators offer premium discounts.
  3. Have your policy underwritten: When a specialist or insurer asks you questions to assess your situation, they can usually offer cheaper premiums compared to buying an ‘off-the-shelf’ policy. Retail policies typically undergo extensive underwriting at application stage to provide an accurate assessment of your specific requirements.
  4. Couples insurance discount: You can save thousands over the life of your policy if you cover both you and your spouse. This is because most insurers offer a couples’ insurance discount of around 5-10% depending on which insurer you go with.
  5. Get free children’s insurance: Select insurers offer premium free child cover when you buy an adult’s life, trauma or income protection policy.

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