Borrowing money whether for investing or purchasing the family home, can increase anyone’s stress levels. We start to think about how we are going to repay the loan should something happen to us or even worse, how will my family survive if I’m not around anymore to take care of them?
“This is why insurances are worth every cent you pay” says Rebecca Howarth from PEB Financial Planning. Their value is in giving us peace of mind. Although it feels as if we are paying for nothing, it is surprising how much comfort comes from knowing that our loan repayments can be made if something should happen and we are unable to work.
The Four most Important Insurances
Income protection insurance
Income Protection pays a replacement income while you are temporarily disabled or incapacitated. As the name states, income protection is designed to compensate you for your loss of income over the limited period of your incapacity until you return to work. It is complimentary to total and permanent disablement as it will also provide a benefit when the disability is temporary.
For most people, their most valuable asset is their ability to earn an income.
Every working Australian has a 1 in 2 chance of being temporarily disabled or incapacitated for 3 months or more before reaching age 65. The average Australian household can survive without an income for just over 1 month. Having income protection insurance in place effectively allows you to protect your most valuable asset. It will enable you to pay for regular living expenses whilst you are unable to work.
Death and total and permanent disability(TPD) insurance
Life insurance pays a lump sum to the policy owner or nominated beneficiary in the event of the insured’s death. Life insurance provides cash to:
- Cover costs such as funeral expenses, legal fees associated with the implementation of your Will and Government charges
- Repay debts such as your mortgage and car loans
- Provide a lump sum for your children’s education
- Provide a lump sum to replace your income. The lump sum can be used to establish an income stream to support your family/dependents in order to enable them to continue their lives with a degree of security
TPD cover provides a lump sum in the event that you become totally and permanently disabled. Payment for a TPD may be made if the conditions of the policy are met such as:
- If you are unable to work
- If you lose limbs or sight
- If you are unable to perform basic daily living activities
The provision of a lump sum benefit, such as major trauma insurance, is often necessary in covering medical expenses and facilitating changes of lifestyle, which may be dictated by the unexpected. Trauma insurance should pay a lump sum when you are diagnosed with any one of a specified number of major situations such as: major heart surgery, heart attack, cancer and stroke.
One extra benefit with Trauma insurance is the ability to insure your children for a lump sum should they suffer a Trauma. This will allow parents to afford to stay home to provide their child with the best care possible – without worrying about finances.
How to organise the best insurance?
The easiest and most cost effective way of organising insurances is through a Financial Planner, consultations are normally free because they are paid by the insurance companies they represent. Best of all, more often than not most insurance premiums can be organised through a superannuation fund, so there are no out of pocket expenses.
*This article is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser.
PEB Property Group is a complete financial planning advisory service for Perth families. Offices are located in Inglewood and Willetton, Perth, Western Australia and offer - Financial Planning · Finance Broking · Property Management · Real Estate Sales · Property Investment · Development.
PEB Finance is a trading name of PEB Brokers Pty Ltd ACN 604 784 401 | Australian Credit Licence 389510 | Credit Representative Number 476313.
PEB Real Estate is a trading name of PEB Real Estate Pty Ltd (Licensee) ABN 33 604 199 617 | Triennial Number RA70508.
PEB Financial Planning is a trading name of PEB Group WA Pty Ltd ACN 142 958 254. Rebecca Howarth and Howarth (WA) Pty Ltd trade as PEB Financial Planning. Rebecca Howarth (ARN 244928) and Howarth (WA) Pty Ltd (ARN 433328) are Authorised Representatives of NEO Financial Solutions Pty Ltd. AFSL 385845 | ABN 64 141 607 098.