We all know how important it is to have life insurance; it’s a small expenditure to secure a large future for your family if they had to live without you. But what if you suffered from an event like a severe stroke, and survived? You wouldn't be able to work, so the family's source of income may be lost. You would probably also be bogged in extra medical costs to support you both temporarily and permanently. You obviously can’t claim on your death cover, 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 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.
Obviously you'd like the most comprehensive cover you can afford, but how do you make it cost effective?
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You can bundle them together, which provides a simple 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, or you can opt for linked insurance, which means all of your protection is on one policy and you only 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.