While most people understand the necessity of insuring their house or their car, there can often be some hesitation about insuring the most valuable asset of all: health. There are varying degrees of health cover and while it may appear morbid to think about them, in the event of the worst, it is better to be prepared and not have to think about where the money will come from.

While some super funds include a variety of insurance in their packages, it is important to be clear about whether they specify trauma cover or total and permanent disability insurance. Below are the different kinds of health related insurance, and the differences between them:

Income protection insurance: will pay out a certain percentage of your income should you be unable to work for a pre-determined period of time.

Health Insurance: The most general kind of personal insurance, health insurance provides a certain amount of re-imbursement for medical expenses, depending on what is set out in your policy. Common inclusions are ambulance, optical, dental and maternity options. Ensure you read the fine print carefully if there are any particular illnesses you are most concerned about.

Total and Permanent Disability Insurance (TPD): will pay out if you become totally and permanently disabled according to criteria set by the insurer.

Trauma Cover: will pay out if you suffer a severe medical incident set out in the policy, for example some degenerative illnesses or loss of sight or limbs. It is different to TPD insurance as it does not necessarily require the insured person to be permanently disabled by the traumatic incident.

Life Insurance: Will only pay out in the eventuality that you die, in accordance with a situation set out in your policy.

According to statistics released by the Asteron Life insurance group (cited in ‘Trauma ‘Danger Years’ Revealed’ on Risk Info, April 2, 2013) trauma cover is often lapsed at 44, just 5 years shy of the national average age of diagnosis with life threatening illnesses. Similarly, the most frequent age at which income protection is lapsed is at 44, and the average age at which a claim is commonly required is 46. TPD insurance is most commonly lapsed three years before the average claiming age of 48.

Maintaining insurance cover could become the most important thing that you can do to safeguard your lifestyle, and that of your family.

Graph provided by MLC for use by Finstyle. All advice is general, seek advice from your financial adviser to determine if advice is right for your circumstances.

Disclaimer: The postings on this site are my own and don’t necessarily represent the views or opinions of Total Financial Solutions Australia (AFSL# 224954)

This information does not take into account the reader’s objectives, financial situation or needs. For this reason, before you act on this advice, you should consider the appropriateness of the advice taking into account your own objectives, financial situation and needs. Before you make a decision about whether to acquire a financial product, you should obtain and read the product disclosure statement.

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