If effective financial planning includes strategic asset accumulation, then insurance is about protecting these asset accumulations. Insurance is designed to protect our client's ability to create wealth. We all expect to stay healthy and live to a certain age. However, the unexpected does occur and unless these unexpected possibilities are insured against, even the best financial strategy could fail.
Below is some general information on the main types of insurances, however for more detail on how FinGuard Financial Planning helps their clients protect the livelihood of themselves and their family, contact our office today.
As well as the aspect of protection, insurance provides peace of mind. If an unexpected illness or accident were to occur, the financial effect to clients and their family could be minimized by having sufficient insurance cover in place. Like home or car insurance, personal insurance is something we pay for, hoping we never have to use it.
Some of the questions we ask clients are: If you are unable to work, how long can you provide for yourself and your family? Who will pay the bills, the mortgage and the like? If they were to die or be permanently disabled, how will their dependents be provided for and how will this affect their lives?
Life insurance provides financial protection for a client's family if they were to die. The amount of cover clients need varies, and is based on their debt levels, financial commitments and income needs. The cost of life insurance varies depending on a client's age, occupation and health levels.
As life insurance premiums are usually not tax deductible to an individual, often it can be advantageous to take out this type of insurance within superannuation, as typically, the fund can claim a tax deduction for the premium. This has the additional benefit of being funded by superannuation rather than take home pay.
Total and Permanent Disability (TPD) Insurance
TPD cover is often purchased in conjunction with life insurance. TPD is typically paid out if clients are unlikely to be able to work again due to illness or injury. The precise definition of TPD varies between insurance companies so it is important to seek professional advice about which policy is suitable. TPD is usually used to cover debt, medical expenses and the cost of modifying a client's home to accommodate permanent disability. It may also be used to provide some income replacement.
Similar to life insurance, TPD cover is often taken within superannuation due to the tax and cash flow advantages.
Trauma cover will pay a lump sum if clients suffer a specific traumatic event, such as being diagnosed with cancer, stroke, or a heart attack. The payment is made when the diagnosis is confirmed, provided clients survive for at least 14 days (or less depending on the insurer). Clients do not have to cease work to qualify to receive this benefit.
Trauma cover is designed to help cover the immediate costs of a significant medical event, or just some breathing space while clients recover from their illness.
Income Protection insurance will pay a monthly benefit if clients are unable to work due to illness or injury. Clients can usually insure up to 75% of their pre-tax salary. Benefit payment periods and waiting periods can be tailored to meet a client's personal situation. Income Protection will cover both temporary and permanent disablement. The premiums for Income Protection are usually tax deductible.