Your most valuable asset is your capacity to generate income, as this drives your cash flow and the most fundamental building block for wealth creation.
It is imperative for your financial security to protect this through either adequate cash reserves and/or insurance policies to cover this future need.
The four distinct insurance policies that you can take out are as follows:
Life insurance is a lump sum payment to cover the lack of these future cashflows should you pass away.
It is designed to pay down debt, pay for immediate expenses such as funeral & estate costs, fund spouses future expenditure, future education expenses, and other family financial requirements.
Total & Permanent Disability (TPD)
TPD is a lump payment in the event of permanent disability.
It is designed to decrease or eliminate debt, pay immediate expenses incurred due to event (i.e., medical costs, home upgrades), provides amount for future cash flows to pay for living costs and provide for family.
Income protection is a recurring payment (typically 70%) replacing income in event of temporary incapacity due to sickness or injury.
It is designed to help cover ongoing expenses such as mortgage, general living costs, bills & utilities until the insured has recovered.
Trauma insurance is a lump sum paid in the event of a critical illness (such as stroke, cancer, heart attack)
- It is designed to ease the financial burden during times of medical stress,
- It is the only policy that cannot be owned by your super but can be owned personally, by companies & trusts.
With all the above policies:
- Many industry funds provide a default level of protection (at a cost).
- Can be owned privately through a super or non-super account, through SMSFs, corporations, and trust structures (apart from Trauma which can only be owned personally).
- Policy ownership determines tax treatment, premiums, and advantages.
There are various factors to consider when addressing personal protection. Seeking professional advice is the best way to ensure you consider all the implications and have the correct covers in place. To find out more information please contact us today.