Many people feel that owning life insurance and income protection provides sufficient financial security against the threat of premature death, sickness or injury. Life insurance provides a lump sum benefit if the worst happens and income protection provides an ongoing monthly benefit if you are unable to work.
But is there a financial “blind spot” that may leave you exposed even when these two types of cover are in place?
Identifying the gap
Income protection of course provides the foundation of your financial survival if a sickness or injury occurs. You can generally insure up to 75% of your gross income, which in the event of a claim, will provide a regular benefit to cover every day living expenses for you and your family.
But what if you suffer a condition that presents greater challenges and you require access to a lump sum benefit? The facts are that modern medicine is contributing to improved survival rates for major diseases, such as heart attack, stroke and cancer.
While increased life expectancy is a good thing, we need to think about quality of life.
Surviving a serious medical condition may present major lifestyle challenges that will require funding well beyond what income protection can provide.
These include:
• Covering out-of-pocket medical expenses that are not covered by private health insurance
• Accessing the best medical or rehabilitation treatment that may only be offered overseas
• Paying down major debt such as a mortgage, so you can focus on your recovery, rather than the bills
• Modifying the family home to suit physical limitations caused by your condition
• Re-evaluating priorities and enjoying some quality family time with an extended vacation or even an overseas trip
Trauma cover can be the answer
The solution to bridging the gap between income protection and life insurance is to use trauma cover. It provides a lump sum benefit if you are diagnosed with any one of several major medical conditions. You can use these funds at your discretion to take the pressure off your situation and really focus on what is important in life.
Trauma cover can complement your income protection by helping you fund those big ticket items that income protection simply cannot cover. It can also be a useful way to provide some form of protection for those who are unable to take out income protection because they are not in paid employment. Think about the homemaker and the valuable role they play. If they were diagnosed with cancer and undergoing treatment, who would do their job or where would the family find the money to pay someone to do the job of the homemaker?
Helping you to stay in control
Trauma cover can be the difference between basic survival and recovering well, enabling you to focus on your recovery rather than the bills. Why not include it as part of your financial plan to help ensure you have choices in the event of being diagnosed with a serious medical condition?
How trauma cover can transform your lifestyle To illustrate the powerful benefit of trauma cover, let’s take a look at how it could be used in practice.
Steve works as a manager of a printing company and earns $120,000 p.a. He is married with two children and has a mortgage of $250,000.
Steve has an income protection plan with a $7,500 monthly benefit and a 4 week waiting period. He also took out trauma cover with a benefit amount of $350,000.
Two years after taking out his insurance cover, Steve is diagnosed with coronary artery disease and needs to have bypass surgery. This required him to be off work for 4 months to undergo the operation and to recuperate back to full health.
Steve’s income protection will pay him for 3 of the 4 months he is off work and this will help cover his family’s living expenses. His condition also qualifies him to claim under his trauma cover. Steve used the $350,000 lump sum benefit to:
• Pay off his $250,000 mortgage;
• Fund an extra 5 months of leave without pay ($50,000) after his 4 month recuperation had finished and his income protection payments ceased; and
• Spend $50,000 to take his family on a 5 star European vacation.