Debt Protection: Protect Your Debts With Life Insurance
Purchasing a home or investment property is such an exciting step in life. Nobody really wants to think about the implications of what would happen to their home if something happened to their income; however it is a very important thing to think about.
By taking out a life, total and permanent disability (TPD), trauma or income protection policy, you can secure your home and your future, in the event that something unexpected were to happen.
Life insurance pays out a lump sum cover in the event of death or terminal illness, this is designed to pay out any debt an individual may have. This means their family is able to keep their home and not have to worry about expensive mortgage repayments on only one or even no income.
TPD and Trauma Insurance
TPD and trauma insurance also provide a lump sum payout, however the benefits are paid out at a different time. Instead of in the event of death, payment is made in the event of sickness or injury.
TPD is designed to pay a lump sum in the event that someone is totally and permanently disabled, therefore never able to work again. Most people take a similar amount of TPD as they do life cover, as the expectation is they will never be able to earn an income again, therefore any debt can be paid out, so the only concern will be living expenses.
Trauma insurance also pays out a lump sum, this is paid when a person suffers a critical illness such as a heart attack, cancer, stroke, open heart surgery and even severe burns. There are a range of conditions covered, make sure to check the terms and conditions of the policy, as some policies cover more medical conditions than others.
Income Protection Insurance
Income Protection is one of the most valuable forms of debt protection of all. It pays out a monthly benefit, in the event that a person cannot work due to sickness or injury. Imagine that you had to stop working for 12 months because you’ve been diagnosed with diabetes. Once you’ve exhausted your sick leave and annual leave, would you then have enough savings to support yourself? Or would you have to sell the house and live off the proceeds? Maybe you can survive on a government benefit of $500 per fortnight?
What if you didn't need to exhaust any of those options because you have income protection?
One of the smartest choices a person can make is to take income protection. Instead of just providing a benefit for you minimum loan repayment like loan protection insurance, income protection covers 75% of your gross annual income. This means you can continue to live the lifestyle you are accustomed to, without having to make sacrifices (like giving up the family home).
It is worthwhile speaking to an experienced insurance consultant about debt protection to ensure that you and your family are covered.