The different types of life insurance
There isn’t just one type of Life Insurance, there are all sorts of cover depending on your circumstances and preferences for you and your family. We take a look at five categories of Life Insurance exploring the different types and benefits to give you a great overview of what to expect. It’s always crucial to always read the fine print to avoid unpleasant surprises!
- sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
Published on 18 Jul 14
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There isn’t just one type of Life Insurance, there are all sorts of cover depending on your circumstances and preferences for you and your family. We take a look at five categories of Life Insurance exploring the different types and benefits to give you a great overview of what to expect. It’s always crucial to always read the fine print to avoid unpleasant surprises!
Sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
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Firstly, there is life cover – also known as term life insurance or death cover. This form of insurance pays a set amount of money when the insured person dies, or is diagnosed with a terminal illness, and not expected to live past 12 months. The money will go to the people you nominate as beneficiaries on your policy.
Second, there is total and permanent disability, or TPD cover, which covers the costs of rehabilitation, debt repayments and the future cost of living if you are totally and permanently disabled. TPD cover is often bundled together with life cover.
Third, there is trauma insurance, which provides cover if you are diagnosed with a specified illness or injury. These policies include the major illnesses or injuries that will make a significant impact on a person’s life, such as cancer or a stroke. It is also referred to as ‘critical illness’ cover or ‘recovery’ insurance. Trauma insurance not only pays for treatment or rehabilitation, it can pay for a career and any number of unexpected things.
Then there is income protection insurance, which can replace up to three-quarters of the income you lose if you're unable to work due to injury or sickness. It can cover you for short or long periods and offer various waiting periods to suit your needs. Depending on the policy, payments may continue right up to the age of 65 if the disability is ongoing or permanent. Income protection insurance may be tax deductible.
Lastly, there is Business Expenses Insurance and Key Person Insurance, which are very important if you're self-employed. Business expenses insurance covers the ongoing costs of your business if you can’t work because of illness or injury. Key person insurance covers the losses incurred when you or another person that’s essential to the success of your business gets injured, becomes sick or dies.
As with any insurance, it is crucial for all buyers to understand the definitions and exclusions of their policy to avoid unpleasant surprises at the time of a claim.