#2 Types of insurance

Life Cover

The most common type of life insurance is ‘Term Life’ and continues for as long as you want it to. Cover can be level, or linked to the Consumer Price Index. Also, premiums can increase each year (Annually Renewable) or can be fixed for a term, e.g. 5 or 10 years, or Level to age 65 or 80.Many life insurance policies will pay out the entire sum insured, or a portion, on the diagnosis of a terminal illness. This gives you money to live on, or pay for care if you are incapacitated and can’t work.

For those on a tight budget or want less cover, there is also Funeral Insurance.  If you are young and/or have good health, this type of cover generally unsuitable.

Trauma or Critical Illness cover

These policies pay you a lump sum of money if you’re diagnosed with one of the illnesses or injuries listed on the policy such as cancer, kidney failure, heart disease, paralysis, etc.

Disability Income or Income Protection cover

This insurance pays a percentage of your income if you need to claim because you are ill, injured, and unable to work. Take care with definitions – they’re important.

Total and Permanent Disability cover

Often referred to as TPD, this cover is a lump sum payable after 3 or 6 months if you are totally and permanently disabled, e.g. unlikely to ever return to work or duties. There are two types, Any Occupation and Own Occupation and as with Income Protection cover, care is required around policy definitions.  

Mortgage Repayment cover

These are especially designed around mortgages. All of the above covers can be selected/combined into one policy. Unlike Disability Income policies, the percentage paid is related to your mortgage payment(s), not your income.  

Health/Medical cover 

This is a reimbursement of ‘approved’ medical expenses if you require medical treatment or advice. Again, there are many options usually available for you to choose from, depending on what’s important to you. Some insurance companies offer give premium discounts if you take more than one type of cover with them, so check this out.