Establishing an appropriate personal insurance plan can be a key consideration for wealth accumulation and risk management strategies.

Written by: Christopher Wilsmore

Establishing an appropriate personal insurance plan can be a key consideration for wealth accumulation and related health (and financial) risk management strategies.

It’s a plan B or safety net in the event of your spouse, or your own, unexpected passing, disabling sickness or injury, or traumatic event.

Below is a snapshot overview of the main personal insurances—life, total and permanent disability (TPD), trauma, and income protection.

Personal insurances

Life insurance

Life insurance provides a lump-sum benefit payment in the event you were to pass away. Depending on your personal circumstances (your financial situation, goals and objectives), the lump-sum benefit payment could assist with one or more of the following:

• Debt reduction.
• Income generation.
• Other areas such as children’s education and funeral costs.

Some key considerations for life insurance can include, but aren’t limited to: sum insured, ownership structure, policy structure, and premium style and frequency.

TPD insurance

TPD insurance provides a lump-sum benefit payment in the event you were to become totally and permanently disabled due to a sickness or injury and therefore unable to work again. Depending on your personal circumstances, the lump-sum benefit payment could assist with one or more of the following:

• Debt reduction.
• Income generation.
• Lifestyle modification.
• Immediate and ongoing medical expenses.

Some key considerations for TPD insurance can include, but aren’t limited to: sum insured, ownership structure, claim definition, policy structure, and premium style and frequency.

Trauma insurance

Trauma insurance provides a lump-sum benefit payment in the event you were to suffer a specified traumatic event, such as heart attack, stroke or cancer. Depending on your personal circumstances, the lump-sum benefit payment could assist with one or more of the following:

• Debt reduction.
• Lifestyle modification.
• Living expenses for a period.
• Immediate and ongoing medical expenses.

Some key considerations for trauma insurance can include, but aren’t limited to: sum insured and specified traumatic event coverage, policy structure, and premium style and frequency.

Income protection insurance

Income protection insurance provides monthly benefit payments in the event you were unable to work for a period of time due to a sickness or injury. Depending on your personal circumstances, the monthly benefit payments could assist with one or more of the following:

• Living expenses.
• Mortgage or rent payments.
• Other household bills such as groceries, utilities, school fees, and healthcare.

Some key considerations for income insurance can include, but aren’t limited to: sum insured, ownership structure, claim definition, premium style and frequency, waiting period, and benefit period.

As outlined above, each of the main personal insurances serve a specific protection purpose. Collectively they can provide overall protection from whatever life may throw your way from a health (and financial) risk perspective—an unexpected passing, disabling sickness or injury, or traumatic event.

It’s important to note, that when it comes to personal insurances, there are many different offerings out there, each with their own varying degrees of protection. Therefore, in terms of an appropriate personal insurance plan, it’s not a one-size fits all or set-and-forget approach. 

Next Steps

Given the above, consider the following, which may help you with engaging with your current plan B situation, and assessing if change is needed to protect you and your loved ones from the unexpected:

1. Do you have a plan B (eg personal insurance plan) if not take the next steps and assess what you need 
2. Are you cross-insured? Namely, if applicable, are both you and your spouse insured?
3. Are your personal insurances held inside or outside of super, or a combination of both?  Find out and check the costs for either scenario
4. Has a recent life event occurred that may require a review of your personal insurances?