Personal Risk Insurance

Personal Risk Insurance isn’t just for if you lose your life… it’s also for if you lose your ability to earn an income.

The key to creating an effective personal risk insurance plan is to visualise what a secure financial future would look like for your family if you were to die or could no longer earn an income. It must take into account many issues, including ongoing living expenses, repayment of debts, and special expenses like schooling. It might also take into account the financial cost of fulfilling the aspirations of your dependants and other people close to you. And, if appropriate, your desire to leave a philanthropic legacy.

In the case of you suffering a severe illness or injury, you should also take into account the potential cost of hospitalisation, surgery, medicine, rehabilitation and home nursing costs.

You should also consider the possibility you may need to make modifications to your home to make it easier for you to get around.

Personal risk insurances to consider include:

• Life insurance – pays a lump sum on the death of the insured, and in some cases earlier if the life insured is diagnosed with a terminal illness. Life insurance pay-outs are typically used by beneficiaries to pay off debt and to fund funeral costs. It is also often used to cover children’s schooling and the balance invested to replace the deceased’s salary to help maintain their family’s standard of living.
• Income protection insurance – replaces your income if you are unable to work due to sickness or injury. It provides a monthly payment of usually up to 75% of your pre-tax income. You can generally choose the waiting period (this is how long you must be unable to work before the insurance begins to pay you) and the benefit period (how long the policy will pay you if you are unable to work).
• Total & Permanent Disability (TPD) Insurance – pays a lump sum if the insured is deemed (by two medical professionals) unlikely to ever return to work. There are two definitions for TPD insurance which are ‘any occupation’ and ‘own occupation’.

Personal Risk Insurance isn’t just for if you lose your life… it’s also for if you lose your ability to earn an income.

An ‘any occupation’ definition means your claim will be paid if you are unlikely to ever return to any occupation that you may be suited to by experience or education. An ‘own occupation’ definition is usually preferable, however its premiums are higher, and this option is not available for all occupations.

If you become permanently disabled, a TPD insurance payout can help free you and your family from financial worry by paying for things such as:

• Meeting medical, pharmaceutical, specialised therapies and rehabilitation costs not covered by your health fund
• Paying for a carer
• Funding modifications to your home that may be necessary due to permanent disability (e.g. replacing stairs with ramps)
• Repaying debt
• Topping up your Income Protection policy payments
• Using your payment to create a cash reserve to boost your retirement savings.
• Trauma insurance – pays you a lump sum on the diagnosis of a specified non-pre-existing illness or injury, generally including heart attack, stroke, cancer, and paraplegia. This can be taken as a stand alone policy, or attached to a life insurance policy.Trauma insurance was created when it was realised that medical advances were resulting in patients increasingly surviving major health problems, but that the financial cost of survival was prohibitively high for patients (e.g. medical costs, medicine, time off work, rehabilitation etc). In other words, patients didn’t lose their lives… they lost their life savings instead.

At WrightAdams Advisory, we help you define your vision of a secure financial future for you and your family – and then help you to calculate how much money you’ll need to fund that vision – if you die or no longer earn an income due to serious illness or injury. We’ll then assess if you can afford to self-fund your vision, or whether you need to consider transferring some or all of that financial risk to an insurance company. It’s all about protecting your family from unnecessary financial duress.

Our job then is to research the major, reputable insurance companies to find the insurances which provide you and your family with the right level of protection, including the definitions, clauses and exclusions which best suit you. Of those insurances which meet your needs, we obtain quotes to ensure we recommend the most cost-effective products.