Financial Planning
By Stephanie Palombi/01 Sep 2020/Three-minute read

Discover the difference between life insurance, TPD insurance, trauma insurance and income protection – and how each plays a part in protecting you and your family.

We don’t tend to factor loss of income or illness into our life plans, but if something were to happen that meant you could no longer work, how would you cope?

This is where personal insurance comes in. This safety net means that if something was to ever go wrong, you won’t need to raid your savings or investments to pay for medical bills or to continue to take financial care of your family.

Here are four common types of personal insurance policies to help you choose the best life insurance policy.

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What is life insurance?

When you die, life insurance provides your family with a lump sum benefit to make sure they can maintain their current lifestyle. This money can be used to pay for any funeral expenses, pay off the mortgage or any other debts, educate your kids or provide an ongoing income.

What is TPD insurance?

If you’re permanently injured or disabled, Total and Permanent Disability insurance (TPD) gives you a pre-agreed amount of money in a lump sum payment. This payment can be used to pay off any debts, assist with medical costs or cover any fees associated with modifying your home or vehicle as a result of the injury or other medical condition. If you can’t work, you’re also able to use this as capital to generate an income to meet your ongoing living expenses.

What is trauma insurance?

In the event you’re diagnosed with a critical illness or injury, trauma insurance provides you with a lump sum payment to pay off debts and assist with any medical costs while you’re unable to work. Specified traumas usually include certain cancers, heart disorders, nervous system disorders, various accident conditions, specific body organ disorders and loss of speech.

Why is trauma insurance so important? If you suffer from a critical condition but you’re not totally and permanently disabled, your TPD cover won’t apply. Even if you have income protection cover to pay your general living expenses, it may not be enough to cover all the additional expenses associated with a serious illness or injury.

What is income protection insurance?

Everyone who relies on a regular income should consider income protection insurance. Having the ability to earn an income is one of your most valuable assets and needs to be protected. Income protection cover is simply a regular payment made to you if you’re unable to work for a period of time due to illness or injury. The maximum percentage of salary that insurers will cover is 75%.

Why having personal insurance is important

None of us know what lies around the corner. No matter what your financial position is now, an unexpected event can see all that hard work disappear very quickly. There’s no amount of money that can replace your health and wellbeing or the role that you play within your family, but having the right insurance can provide you with the peace of mind that if anything were to happen to you, your family’s financial security will be protected.

At Johnston Grocke, we’ve been providing Australians with personalised financial, business, property and accounting strategies for over 20 years.

We know that life (and especially money) can get complicated, so you can count on us to bring consistency, certainty and confidence to your finances, so you have more time to enjoy the good stuff in life.

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