Personal Insurance – Planning for the Unexpected

By Michael Wong

personal health insurance

Personal insurance is all about planning for the unpredicted. It is designed to help protect your family, cover your liabilities and can give a lump sum payment or a regular earnings when you can’t. Consider the chance that you were to become injured and were unable to work for several months. Could you continue to meet your monthly commitments like telephone bills, mortgage payments, and rent? If that happens you want to be sure that life can continue for you and your family, without the stresses of wondering where the money is going to come from. The amount of insurance you need depends on your personal situation, particularly your financial commitments and lifestyle expectations.

Personal insurance is one of the most ignored insurance coverage today. It is an important part of any financial plan. Without proper asset protection, your houses, vehicles, incomes, and other possessions could be at jeopardy. It is a cheap way to reassign the risk in an event to someone else, such as an insurance company.

The categories of Personal Insurance consist of Term Life insurance, Total and Permanent Disability, Income Protection, and Critical Illness. Term life insurance pays a lump sum benefit on the decease of the life insured, throughout the term of the insurance. It is probably the most inexpensive form of protection for your family in the incident of your death. It gives the ability to repay debts, to cover dependants from the loss of the major income provider, to cover capital gains tax liabilities, and to secure a business.

Total and Permanent Disablement is usually an non-compulsory extra cover on a life policy. The purpose is to provide a lump sum of money should a person suffer an illness or injury which totally and permanently incapacitates them from working. The function is to protect business against loss of sales and profits, cover the mortgage or pay other debts, provide an income stream, sustain business lines of credit, provide money for home modification or renovation.

Income protection insurance will pay a regular income to a person if they are disabled by a accident or disease. The upper limit benefit covered is usually 75% of gross income after business expenses. The purposes are to continue an income stream in order to repay debts and maintain current lifestyle, provide the ongoing capability to preserve other protection, savings, asset and retirement plans.

Critical Illness pays a lump sum in the incident of a diagnosis insurable condition, e.g. heart attack, stroke, cancer, or major head injuries. If a person undergos a medical trauma, term life insurance won’t help as the person is still alive. Assume a person has a mild heart attack and is critically ill but is capable to go back to work after two months. Will he or she be as productive as before or stand the pressure associated with working as hard? Policies like income protection and TPD may not be appropriate since pay-out depend on the result of the incident after its happening. What is needed is a cover like trauma insurance which pays out on the actual occurrence of the event.

Personal insurance is an important part of the whole financial planning. Insurance is a way to reduce risk and protect things that we value. The bottom line is your family and your assets are too important to be neglected. So it’s very crucial to have it as a key element of your financial plan. The internet has made it easier to search for the best life coverage. On the other hand, you may get lost in the multitude of insurance products available. Make sure you can find the plan that best suit you and your family’s financial needs.

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