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Life and Income Protection Insurance
The life insurance umbrella covers a range of product types. Life insurance, trauma cover, total and permanent disability (TPD) and income protection (IP) all cover you in different ways. Which ones you choose to take out will depend on your individual circumstances and needs.
If you’re thinking about taking out life insurance or wanting to update your level of cover, here’s a closer look at the four types of life insurance and the different ways they work to protect you.
What are the different types of Life Insurance?
There are four main types of life insurance, each designed to provide financial protection for different life events.
|Type of insurance||Events Covered||Payment Type||Common Purpose|
|Lump sum||Replacement income for spouse and dependants
Paying off mortgage
|Total and Permanent Disability (TPD)||Permanent loss of work income due to illness or injury||Lump sum||Replacement of income up to retirement age
Initial and ongoing medical and home care
Paying off mortgage
|Trauma cover||Critical illness (such as cancer, stroke, heart attack)||Lump sum||Recovery and rehabilitation expenses|
|Income Protection (IP)||Temporary loss of work income due to illness or injury||Regular monthly payments||Replacement income for everyday expenses (such as mortgage, car payments, bills)|
Because you never know what life can bring, choosing the right combination of life insurance can give you full-spectrum protection and greater peace of mind.
Example: How combining individual products ensures you’re fully covered*
Stephanie, a 39-year-old IT professional, was married with two dependent children. Stephanie had always been a fit and healthy individual.
Stephanie took out a life insurance policy with the following level of cover:
- Life insurance for $750,000.
- Trauma for $100,000 (stand-alone cover).
- Income protection with a monthly benefit of $3500.
Unfortunately, one day Stephanie was diagnosed with breast cancer. She had to stop work to receive treatment over a six-month period.
During this period, Stephanie received her monthly income protection benefit of $3500 (after completing the applicable waiting period). This helped her and her family keep up with regular expenses, including the mortgage repayments, their groceries and other bills. Since Stephanie also took out trauma cover, she received a tax-free lump sum of $100,000. This benefit assisted Stephanie to receive the best treatment available.
Stephanie went into remission for two years. However, the cancer returned and sadly, Stephanie passed away. Her life insurance policy paid out the $750,000 benefit to her family. This allowed Stephanie’s husband to pay off the remaining mortgage and offered extra financial support and security to the entire family.
* This is an example only to illustrate the potential benefit of taking out life insurance and should not be relied upon as indicative of benefits payable
If protecting your income is important to you, let iSelect help you find a suitable policy. Compare Income Protection online or speak to one of our qualified insurance advisers on 1300 887 299.
iSelect Life Pty Limited – ABN 89 124 304 347, AFS Licence Number 331128. Any advice provided by iSelect is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice we give you, having regard to your personal situation, before acting on our advice or purchasing any product. We receive commission for each product sold. You should consider iSelect’s Financial Services Guide which provides information about our services and your rights as a client of iSelect.