Life Insurance Overview

Life Insurance is the best way of providing for your family and next of kin should something happen to you which leaves you unable to provide for your family, either in a temporary or permanent capacity.

As with every other form of insurance however, there are so many acronyms, policy types and forms to complete, to the average Joe like you or I, it can all seem a little confusing. This article hopes to provide you with a little insight to the definitions and basics of each type of policy, and will help you to make the right choice when it comes to life insurance.

The types of cover:

• Life Only
• TPD (Total and Permanent Disability)
• Income Protection
• Trauma Cover

Life Insurance is pretty cut and dry; on the event of your death, the insurance company provides a lump sum to your named beneficiaries to settle your accounts and provide for a funeral, and often leaves an amount left over to provide income for the family moving on from the event. Even if you have no dependants, you should consider outstanding payments such as mortgages – these will need to be paid in the event of your passing.

Total and Permanent Disability Cover is, once again, pretty self-explanatory. This covers you against not only death, but should you develop an illness or receive an injury which stops you from being able to work or function in daily life – it is usually taken out alongside life insurance, and for the same amount. Definitions of TPD can change from company to company however, so always ensure you’ve read the small print before you agree to anything.

Income Protection is not strictly a form of life insurance, although many companies offer it alongside their life insurance policies so it is worth including in this guide. This protection covers you if you are unable to work for a period of time through illness or temporary disability; usually something along the lines of 75% of your salary for a fixed period of time.

Trauma Cover offers a payout, should you suffer one of an array of serious medical conditions as outlined in an insurance company’s product disclosure statement. These medical conditions vary from company to company, but usually include things like heart attacks or strokes. Trauma cover varies from income protection because it is not based on your ability to work: Trauma Cover will pay out on the diagnosis of one of the conditions specified by your insurance provider.

This short guide to Life Insurance should serve as a starting point to the uninitiated, although one key point to remember is that all these policies are subject to your personal status: A history of heart problems in the family, for example, could make something like Trauma cover far more expensive, or even lead to the company adding exclusions to your policy (Which should be read and considered in detail before accepting), or even declining to cover you for it. However, some companies are more lenient than others on different things, so if one company says no, it may be worth trying another to see if they will cover you.