Many people think life insurance only provides cover if you die. While that’s one option, there are several other types of life insurance to consider. From loss of life to an extended or serious sickness, it’s mainly about reducing the financial impact of those events in your future. Here’s a brief summary of some of the main types of cover. As always, the terms and conditions of any life insurance policy will apply so you should always read your policy wording.
Life Cover
This type of life insurance can pay a lump sum if you die or are diagnosed with a terminal illness and given less than 12 months to live. For example, the people you financially support could put it towards paying off a mortgage or other debt or use it to provide an ongoing income.
Trauma Cover
This type of cover can pay a lump sum if you’re seriously injured or diagnosed with a condition defined in the policy. These policies typically include conditions such as cancer, heart attack, stroke, loss of a limb, deafness, blindness, Alzheimer’s disease, Parkinson’s disease, multiple sclerosis and major organ transplant. For some conditions cover starts 3 months after you’ve taken out the cover. The lump sum could help to cover major health costs or relieve other financial pressures while you focus on getting better.
Income Protection Cover
If you can’t work for a while, because of an extended sickness or you need to recover from an injury, this type of life insurance can provide some cover for your income. It typically provides a percentage of your gross annual income in monthly payments. When you take out your policy you can choose the amount you’d receive per month if you made a claim, how long you can afford to wait before payments start, and the maximum time period payments will continue for (for example, some providers have benefit periods of 2 years, 5 years, to age 65 or age 70).
Total and Permanent Disability (TPD) Cover
This type of insurance can pay a lump sum if you become totally and permanently disabled for an uninterrupted period of time, and it’s unlikely you’ll be able to work ever again. The money can help towards your mortgage repayment, mobility improvements to aid accessibility that maybe required with some disabilities, medical care not funded by the public system or an income generating investment to account for your lost income. It’s up to you.
