Personal Life Insurance Planning
Insurance is concerned about lifestyle protection - a matter of providing money or replacing lost income at a time of financial difficulty. This could be providing a lump sum as a result of premature death or physical incapacity or income replacement if you cannot work.
As a guide, in the event of death of either partner, we recommend that you require sufficient funds to repay any debts and commitments and a capital amount from which to generate an income to meet your needs.
Life Insurance
There are many different types of life insurance that have a large number of features – and the type we recommend for you is dependent upon what you actually require.
Term Life Insurance
Term Life Insurance is perhaps the most common form of life insurance purchased. It provides a lump sum payment to the policy owner or nominated beneficiaries in the event that the life insured dies while the policy is in force. Total and Permanent Disablement (TPD) and Trauma cover are often bundled with Term Life cover.
Whole of Life Insurance
Whole of Life Insurance combines life insurance with a savings/investment element. Policies usually participate in the life office’s surplus by way of declared bonuses, which are additions to the sum insured and paid at the same time and under the same conditions as the sum insured. In the event of a claim (as a result of the death of the insured) under this type of policy, the underwriter pays out the insured amount plus any bonuses under the contract to the policy holder or beneficiaries. Alternatively, the policy may be surrendered and the cash value received.
Endowment Insurance
Endowment policies are similar to Whole of Life policies except that a benefit is payable on a specific date (maturity) or on the death of the insured, whichever comes first. They are a combination of life insurance and an investment policy. The actual payment will depend on investment performance, the level of premiums paid and the length of the time held. The maturity value is comprised of the guaranteed sum insured plus any annual and final bonuses.
TPD (Total and Permanent Disability) Insurance
TPD Insurance is usually sold as an additional benefit in addition to a term insurance policy. This cover provides payment of the sum insured should the life insured become totally incapacitated through injury or illness and satisfies the policies definition of Disability.
Trauma Insurance
Trauma Insurance is designed to provide a cash lump sum payment when the insured suffers for the first time certain specified medical conditions (eg. serious heart attack, stroke, cancers, etc.). The cover may extend to injuries or in case the injured should happen to die.
Income Protection Insurance
In the event of permanent or temporary disablement resulting from either sickness or accident, a benefit percentage of your income will be received as an income stream for the period you are out of work. It is an important part of insurance as it allows you to pay for regular living expenses while being temporarily out of employment.
Business Expenses Insurance
This is a policy that covers the running costs of a business when the main income generator in the business is unable to work for a variety of reasons. This ensures a business can keep going or can be wound up over time or sold when the key person in it is incapacitated.
Succession Planning and Insurance
Insurance can be an important part of a succession planning strategy in some businesses. It may be that taking out an endowment policy will allow a parent to pass a business wholly to one member of a family and give the equivalent value to another member as a cash lump sum.
Term life may allow partners to ‘buy each other out’ of a partnership if one partner dies unexpectedly rather than trying to carry on the business with a spouse or with the estate as the other partner.
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