Types of Insurance

Insurance can help minimize the effects of personal or financial disaster and there are several types of cover. These include cover for loss or damage to your home and contents, as well as loss of income or loss of life.

As things stand now, Australians are underinsured.

Recent studies show that the number of people who buy insurance cover outside their super fund arrangements is falling steadily. The amount of cover people have through the automatic-acceptance provisions of their super fund is often inadequate.

The uncertainty over insurance arrangements in the choice of funds regime will make the situation worse. Australia faces a life insurance crisis. Therefore, it is vital to seek the help of a financial advisor and plan protection for all seasons.

Life Insurance

If you are the primary income earner and you have a mortgage, your family could lose their home if you die, leaving them without the money needed to make regular loan repayments.  Also referred to as term insurance or death cover, it provides a lump sum payment on the death or terminal illness of the insured.  Payment is made to the legal owner of the policy, who can be a spouse, a business partner or the person insured.  Lump sums are paid to the policyholder or the insured’s estate.  Payment for terminal illness will occur when the insured person is diagnosed as having less than 12 months to live.

Trauma insurance

This is a relatively new form of cover, designed for people who survive serious medical conditions, such as heart attack, but who may need continuing medical support and may never return to full-time work.  A limp sum payment is made upon diagnosis of a specified medical condition.  Policies vary-some cover as many as 40 conditions, other only about 10.

Total and Permanent Disability Insurance

TPD is an added benefit attached to life and trauma policies.  It covers situations where, because of sickness or injury, the insured person is unable to work in their own, or any, occupation for which they are suited by training or experience.  TPD payments are lump sums.

Income Protection Insurance

Income protection insurance cover pays up to 75% of the insured person’s annual income, in the form of regular payments, if a person is unable to work.  Being unable to work is defined as being unable to perform one of your normal work duties.  In many cases, the annual premium for income protection insurance is tax deductible.

Business Insurance

Business insurance uses one or more of the policies listed above to cover a situation in a business where a “key person” dies, becomes disabled or is ill, or where repayment of a loan needs to be guaranteed.

Mortgage Protection Insurance

Mortgage protection insurance is designed to help you meet your monthly mortgage repayments in the event you are struck down by illness, disability or unemployment.  Most policies cover your home loan repayments if you dies

A mortgage protection insurance policy can be taken out when you first get a home loan or during the duration of the mortgage.  Premiums and policy features vary between insurers so, as with all types of insurance, you need to shop around and check which policy best suits your needs.

Home Building Insurance

As a homeowner, building insurance is an absolute must.  Your home is likely to be the greatest asset that you will own, so it’s wise to protect it.  Building insurance covers your home in the event of such disasters as fire, floods and other natural disasters.  Most lenders won’t approve a home loan without building insurance.  Replacement insurance covers the replacement of the house and most things that come with it, such as windows, ceilings, the roof and floor materials.

Home Contents Insurance

Home contents insurance protects you from financial loss if the contents of your home are stolen or destroyed by a disaster such as fire or flood.

The level of cover you need is referred to as the sum insured which should cover the amount it would cost you today to replace the contents of your home if you make a claim.

When insuring your contents, make sure you correctly estimate the replacement value for various items.  You should complete a room-by-room inventory of contents and calculate how much it would cost to replace existing contents with similar new items.

Landlord’s Cover

The two most important kinds of insurance you should have for an investment property are building insurance and public liability insurance.

Landlord’s insurance can bundle different sorts of cover.  You can choose to get cover for building replacement, accidental damage to your property, loss of income sue to tenants defaulting on rent or cover for any legal expenses against tenants.