The purpose of Risk Insurance is to ease the financial burden that can impact you and your family owing to an unfortunate medical event such as an accident, illness, disability or death.

Protection is available in the following areas:

• Term Life
• Total and Permanent Disability
• Trauma
• Income Protection
• Business Expenses Insurance

The recommendations contained within a Statement of Advice define what finance wise believe to be the most appropriate Insurance cover for your particular needs and are intended to protect your family’s financial security if an event occurs.

Below is a brief description of each form of insurance. Each type of insurance has certain limitations and benefits associated that are quite often unique to each individual contract. The definitions below should be considered a summary only. More detailed definitions that are applicable for the products we recommend can be found in the Product Disclosure Statements which will be given to you.

Term Life

Term Life provides a lump sum benefit payable to the policy owner upon death. When the benefit becomes payable, it is normally paid to your dependents or your estate. Some policies will also pay the benefit on diagnosis of terminal illness. This lump sum could be used to pay back debts and/or provide a lump sum that can be drawn upon to create income, and so help your family maintain their current lifestyle.

The most common form is a yearly renewable policy, meaning that the premium is calculated each year and will normally increase as you get older. The premium is charged each year taking into account your age, occupation, gender and smoking status.

This form of insurance is flexible in that the sum insured can be altered to suit your financial circumstances without incurring any financial loss. Most forms of yearly renewable term are guaranteed renewable. This means that it can be renewed automatically irrespective of the status of your future health. However, the company can change the table of rates at any time unless the company offers a rate guarantee for a specified period from commencement.

Tip – Ask us for a policy that allows an early release benefit to cover funeral expenses.

Total and Permanent Disability (TPD)

This benefit is a lump sum paid if you become totally and permanently disabled. This form of insurance is usually available as an optional benefit on a Term Life or Trauma policy. You must be disabled to such an extent that you are unlikely to ever engage in either: your own occupation OR any occupation

The first definition offers a more beneficial policy. It is likely to be the most expensive and only available to selected occupations. The second definition is much more restrictive in that it includes ‘any occupation’ to which you may have been suited by education, training and/or experience.

When considering TPD cover the definition of “own” and “any” occupation used by the product should be considered in your personal circumstances. Eligibility and cost of TPD insurance is also contingent upon your specific occupation.

Many of the features of Term Life Insurance will apply equally to TPD. The sum insured is payable in the event of TPD and is generally restricted to being no more than the death benefit. The lump sum could be used to help pay for debt reduction, income generation and the inherent costs of permanent disablement.

Tip – Once a client makes a claim on a TPD policy is unlikely they will ever receive cover again. Ask us for a feature that is linked to a life insurance policy and if a claim is made the life insurance will not reduce and the premiums will be waived for the life of the policy.

Trauma

This form of insurance is available as an optional benefit on a Term Life insurance policy or as a stand-alone policy. A trauma payment is likely to be paid should you suffer any of the covered conditions. This could include, but is not limited to: heart attack, stroke, cancer, paraplegia, multiple sclerosis, Parkinson’s disease, chronic liver, lung and kidney disease. The exact condition covered, as well as the definition of each condition, varies for each product.

The lump sum could be used to accurately diagnose the condition, complete the treatment and then the rehabilitation. Following that debt reduction and costs related to making lifestyle adjustments, necessary home and/or car modifications can be made.

Top Tip: According to the statistics one in three Australians will be able to claim on a Trauma Policy. With careful reading of the policy wording even if a client is paid for a melanoma claim at age 30 they can still receive a payment at age 55 if they suffer a heart attack as long as they have selected a trauma reinstatement feature.

Income Protection

This form of insurance provides you with a monthly income should you be unable to work due to sickness or injury. The benefit paid can be used for any purpose and thus can be used for living expenses, home loan repayments, regular investment and other costs. This enables you and your family’s lifestyle to be maintained during the disablement period.

It is particularly important to those who have geared investments in which the loan payments are reliant on your income. Income protection insurance provides a regular income up to a pre-determined benefit period of several years or up to a specified age.

The maximum benefit paid is usually limited to a percentage of either your current income or the income prior to your disablement. Indemnity contracts offer payments whilst on claim of an amount equal to a fixed percentage (usually 75%) of pre-disability income up to the amount insured.

Alternatively, an Agreed Value product guarantees payment of the sum insured irrespective of the actual pre-disability income.

Payments received are taxable and the insurance premiums are normally tax deductible.

Top Tip: There are two methods of calculating a premium. Stepped, where premiums commence at a lower level and increase every year or Level where repayments commence at a higher level but remain constant. A client will always pay more on a stepped premium owing to the incremental increases towards the latter half of the policy.

Business Expense

Business expenses insurance offers similar benefits to income protection contracts, but is only available to certain self-employed persons who wish to cover their non-income producing business expenses should they be unable to work because of illness or injury.

The wide range of additional benefits offered in income protection products are not usually offered with business expenses insurance.

Benefits are usually paid on a monthly basis and can reimburse up to 100% of approved business expenses. The benefits are generally limited to 12 months.

Insurance inside Super

This strategy is becoming increasingly popular as generous insurance limits are possible without any effect on the family budget as the superannuation fund will pay for the premiums.

With clients who are self-employed it creates a unique opportunity as superannuation contributions are tax deductible. A note of caution as superannuation is designed to provide capital for retirement and obviously the premiums will reduce the balance of the fund.

Talk to us today about Family Risk Protection