Bundling Life Insurance with TPD & Trauma Insurance

We all know how important it is to have life insurance; it’s a small expenditure to secure a large future for your family, in the event that you pass away.

Something that many Australians don’t stop to consider is what would happen if they suffered a medical condition, (such as a stroke) and survived?

You obviously can’t claim on your death insurance, so what do you have in place to look after yourself and your family?

Total and permanent disability (TPD) and trauma insurance are two options that will cover you in this circumstance and pick up any shortfall you may have across your insurances.

TPD Insurance provides a lump sum benefit in the event that you become totally and permanently disabled. This can be due to sickness, accident, injury or illness.

Trauma Insurance pays out a tax free lump sum benefit upon diagnosis of around 35 different medical conditions such as cancer, heart attack, open heart surgery and stroke. This helps to cover medical bills and other costs associated with these illnesses.

Having established the need for these covers, you now need to decide the best way to structure your insurance to make it cost effective.

You can bundle them together, which provides the greatest way of obtaining cost effective insurance and makes it easier for you to manage too.

When you purchase insurance you can choose to either purchase stand alone insurance, (and have up to two or three policies to manage) or you can purchase linked insurance benefits, which means all of your protection is on one policy and you pay one premium per month/year.

Bear in mind that if you select a linked benefit, then a claim on your TPD or trauma insurance is going to reduce the amount of life insurance you have in place. For example:

I have $1,000,000 life insurance, $500,000 TPD and $250,000 trauma cover. I claim on my trauma insurance, thereby reducing my life insurance to $750,000 and my TPD insurance to $250,000.

If you don’t want this to happen, but still want a cost effective policy, for just a few dollars a month you can include life and TPD buy-back on your policy. This increases your life cover back to its original sum insured after a claim on your trauma or TPD. This will not reinstate the cover you have just claimed on though.