Life insurance may seem complicated, but it doesn’t have to be. We’ve developed a guide to help you understand the different types of life insurance that may protect you and your family. ‘Life insurance’ is an umbrella term for the four types of life insurance cover: Life Insurance, Trauma Insurance, Total and Permanent Disability (TPD) Insurance and Income Protection Insurance.

This protection is designed to help you financially (either a lump sum or monthly income) in the event of an illness, injury, disability or when you pass away. What you and your family are covered for depends on the type of life insurance you take out.

What is life insurance?

Life insurance helps protect your family’s financial future and gives them options if you are no longer around.

Life cover provides a lump sum payment if you pass away or become terminally ill. This benefit can be used to help your loved ones pay off debts, such as your mortgage, or to provide for future financial needs such as childcare, school fees and day to day living expenses.

What is trauma insurance?

Trauma insurance gives you choices so you can still make the most of life if you have a serious illness.

You can often choose to add trauma insurance (also known as critical illness insurance) to your life cover. It pays a lump sum benefit if you’re diagnosed with a traumatic event, like cancer, or suffer a serious health event like a stroke. This benefit gives you choice and flexibility at a time when you need it most. It can help you focus on your recovery, get treatment or rehabilitation and pay for a carer. The benefit you receive depends on the level of cover you choose.

What is Total and Permanent Disability (TPD) insurance?

Total and Permanent Disability (TPD) cover gives you options to help you live a better quality of life if you are permanently disabled and can’t work.

You can often choose to add TPD cover to your life cover. If you’re totally and permanently disabled and unable to work again, TPD can help provide financial assistance to help with rehabilitation and general living costs. It pays you a lump sum benefit to help pay for rehabilitation treatments, medical expenses, long-term care and possible household modifications. You choose the level of cover that you think you’ll need.

What is income protection insurance?

Income protection helps you protect one of your most valuable assets – your income.

Income protection will provide a regular monthly payment of up to 70% of your pre-disability income if you are unable to work due to illness or injury.

Getting sick or suffering an injury is stressful enough without having to worry about finances. Income Protection can help you take care of your everyday living expenses, utilities, school fees or childcare while you're unable to work. It will help provide you with financial support while you get back on your feet, without the worry of how you’ll pay the bills or take care of those who depend on you.

How much life insurance cover do you need?

Before you choose any type of life insurance, you’ll need to work out what type suits your situation best and how much cover you need.

When calculating how much life cover you and your family may need, think about the assets you already have, like super and savings. Then think about what financial debts you’d like to pay off like your mortgage, medical expenses or other personal loans and how much you’d like to leave your family to meet their financial needs now and into the future.

By making sure you have the right type of life insurance, you and your family can face the future with greater peace of mind.

What other protection needs do you have?

Understanding your insurance needs and how to protect your lifestyle can be difficult. A financial planner can provide personalised advice to help you achieve your wealth goals at any life stage.

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Things you should know

This article is intended to provide general information of an educational nature only. The information has been prepared without taking into account your objectives, financial situation or needs. You should, before acting on this, consider the appropriateness to your circumstances and read the relevant Product Disclosure Statement and Target Market Determination before deciding to acquire any product.