WE get this question all the time. And the truth is insurance is the ultimate backup. It provides you with support when you need it most. Let's take a couple of examples.
This is Jerry and Samantha, they have just had their first baby girl and Samantha has taken a little time off work to raise their little one. While Samantha is off work the family is surviving on just Jerry's wages and a little booster they're getting from Centrelink. Jerry had an accident at work and broke his foot. As a builder he was unable to get back to work and continue with his duties. With the families savings at a low Jerry has become stressed and worried about how he and Samantha are going to pay the bills and look after their little girl. Jerry is likely to be off work for almost 3 months and possibly longer.
Now lets look at a comparison. Same Jerry, same Samantha and same situation however Jerry had income protection insurance. Samantha and Jerry did some quick thinking and voila Samantha remembered that they had taken out income protection insurance. Samantha called the insurer and after their waiting period (in this case 14 days) their claim was paid for the duration that Jerry was off work. This took the financial strain off of Jerry and Samantha and Jerry was able to heal in peace before returning to work.
Jack and Jill have had a rough ride. They have had a great life, they spent many of their younger years travelling the world. They got into the housing market a little later than their cohort and are paying off a large mortgage in their 40's.
They are both working and need the two incomes to make ends meet. One day Jack gets a call while he's at work and Jill has been in a serious accident. Unfortunately Jill has passed away. A few months has passed and after paying for funeral expenses Jack is really struggling to meet his commitments and will have to sell the home.
In contrast lets say the Jack and Jill each had an active life insurance policy with accidental death cover in place. This was enough to pay out the mortgage and fill Jack's pockets to spread Jill's ashes in her favourite places around the world.
TPD or TOTAL AND PERMANENT DISABILITY COVER
Michelle works as a kindergarten teacher and overs her job. She's been doing it for almost 25 years. She visited a doctor for a checkup who referred her to a cardiac specialists. The specialist found that she had a severe heart condition which until then had gone unnoticed. This was considered to be extremely dangerous and she was told by her doctors that she would be unable to continue in her role without risk of death.This left Michelle very traumatised, she was unsure of what she could do or how she could survive given her condition.
Let's suggest that Michelle decided to take out TPD or Total and Permanent Disability Cover 2 years prior. She was covered by an own occupation definition by her insurer. Michelle received a lump sum amount to ensure she had sufficient funds for her living.
Meet Sarah and Michael. Sarah is a super mum of 3, working as an accountant and paying the family bills. Michael was in a car accident years ago and isn't able to return to work for several years to come. Unfortunately he didn't have and insurances in place to protect him (but that's another story). Sarah and Michael have had their mortgage for 10 years and have $500,000 left owing. Due to Sarah's income the couple does not receive a disability benefit from Centrelink for Michael.
Sarah was diagnosed with a Critical Illness (like a heart attack, stroke or cancer) and was incredibly ill and unable to get to work. Because of this the couple now have very few funds to pay their bills and cover their mortgage. They were so busy that they never thought about a backup plan. This means they're pulling their kids out of private school at the end of the semester and have had to ask the bank if they can have a grace period on their mortgage.
Now lets imagine that Sarah had Trauma Cover or a Critical Illness Policy. At the time of receiving her diagnosis Sarah received a lump sum benefit amount to cover the cost of her medical expenses, pay out some of her bills and settle her and Michael's mortgage. Sarah can now get take the time to recover and get better from her illness.