It’s a fact of life that most people live from pay cheque to pay cheque. Not many have cash reserves capable of seeing them through a significant period of time off work. So what happens to your debts (mortgage, credit card and other loans) and everyday living expenses if you are unable to work?
This is when insurance should step up to the plate for you.
Most people will consider themselves all wrapped up if they have the three main insurances:
- Life Insurance – a great start! This will cover you for a set and agreed amount if you unexpectedly lose your life.
- House Insurance – also an essential building block. This will cover the replacement or repair cost of your home should disaster strike – fire, flood, or any other damaged agreed upon by your insurer.
- Contents Insurance – not vital, but definitely a good one to invest in. This will ensure anything inside your home will be covered in the event of excessive damage – theft, fire, flood, vandalism etc.
However, too many people don’t place enough value on their most important asset – themselves, and their ability to earn money. Making sure you are fully insured to cover all of your assets and commitments is even more important once you have a home loan to think about too.
There are different ways to cover yourself if you find yourself either temporarily or permanently unable to work:
- Mortgage Insurance. This will cover your mortgage repayments up to an agreed value if you are unable to work either temporarily or permanently – depending on your policy – or a lesser amount if you are made redundant.
- Income Protection. Covers either all or an agreed percentage of your income should you fall ill, be diagnosed with a terminal illness, or lose your job due to circumstances outside your control. The advantage of income protection is that is can stretches a little further than trauma or mortgage insurance – depending on your previous income – so it should cover some of your other essential living costs too.
- Trauma Insurance. This is similar to income protection but cover provided is limited to inability to work due to trauma. Basically, trauma insurance will cover you if you experience a heart attack, stroke, or similar event that affects your ability to work, or if you are diagnosed with a terminal illness. Trauma insurance will also cover any ongoing medical costs you may be left with – physio, special transport, therapy etc.
You should always keep in mind that insurance fine print is a must read! Policies and qualifying factors vary from insurer to insurer so make sure you know what you’re paying for and the extent of your cover.
Personal insurance can be a little complicated as some policies offer very similar cover – being over-insured is almost as unhelpful as being underinsured. The key is knowing the value of your income, the value of your commitments, and finding the right cover to protect you in all worst case scenarios.
Losing your ability to earn can be stressful enough – the right cover will mean you can focus on replacing your income or restoring your health without the added financial pressure.
If you are still not sure which type(s) of cover would best protect you and your assets, it might be time to speak with Sam Kodi.