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Expect the unexpected – understanding the essentials of personal insurance

Analaura Luna

If there’s one thing we’ve learned from Monty Python, it’s that nobody expects the Spanish Inquisition. Their chief weapon is fear … fear and surprise. Their two chief weapons are fear, surprise and ruthless efficiency … wait. I’ll come in again. Ahem. Anyway, the point is that while you may feel pretty certain that you can cross the Spanish Inquisition off your list of potential worries, life does have a tendency to throw the unexpected at you. You might lose your job. You might get sick or injured. Difficult as it is to contemplate, you might even die. It can be comforting to think that these things only ever happen to other people and will never be your problem, but unfortunately the world doesn’t work like that: bad things sometimes happen and sometimes the person they’re going to happen to is you. The thing to remember is that preparing for the worst isn’t going to bring trouble down on your head – nobody was ever struck by lightning because they took out life insurance. All it means is that if something should happen, you and your family will be all set to weather the storm.

If you have people who depend on you to support or take care of them then you need to have personal insurance covers in place to provide for them if you can’t. Even if you are able-bodied and employed, you have to consider what you would do if something happened and you needed to take time off work to care for your partner and your children. And it’s not just about the breadwinner. Many homemakers feel that they don’t need insurance, because they don’t contribute to the household income, but it’s a well-known fact that household chores are never finished and if you aren’t able to do the cooking, cleaning, washing and childminding, you’re going to have to pay somebody else to do it. The average cost of full-time childcare in Australia for two children is $650 per week and a basic housekeeping service can cost up to $80 per hour. While that may cover the vacuuming, it’s not going to get anywhere near the end of the list of household tasks that need to be done. The fact is that the homemaker has quite a substantial ‘salary’ that the family would need to cough up in the event of a crisis.

There are three kinds of insurance that are worth considering if you want to make sure your family is financially secure: life and total and permanent disability, trauma, and income protection. The first of these is the most straightforward, but also the most unsettling to think about, so we’ll make this quick and painless – this is the one that will support your family if you die or are seriously disabled. Trauma insurance will pay out a lump sum to you if you should suffer a critical illness (most policies will cover you for cancer, heart attack, stroke and coronary bypass, among other things) and it can be vital for covering unexpected medical bills. Income insurance will replace your salary if you have to take more time off work than is covered by your accrued sick leave and annual leave. Unlike trauma insurance it doesn’t specify which illnesses are covered, so it’s a lot more flexible.

In all cases it’s important to get your insurance from a reputable provider, not the one you see advertised by your favourite television personality, or the one offered by the particularly persistent telemarketer. And always read the fine print. The goal here is to give you peace of mind: if you’ve got good insurance cover you won’t have to lie awake at night playing ‘what if …’ in your mind. There’s no point having the ‘cheapest’ or ‘easiest’ cover if all that it achieves is replacing that worry with the fear that you might not be thoroughly covered after all, or that you might have bought insurance from a scam artist. Do your research and find the right personal insurance covers for your family before you buy. That way, the only thing you’ll have to worry about is Monty Python’s Spanish Inquisition and their dreaded comfy chair.

If you liked this article you might also be interested in these other articles about personal insurance covers:

The Three Pillars of Personal Insurance

Trauma insurance - providing you and your family with peace of mind

Want more? Take a look at the rest of our articles about personal insurance covers.

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Author's Biography

Analaura Luna is an author, wealth adviser and founder of Your Family Your Money. Your Family Your Money’s goal is to simplify traditionally complex financial strategies, demystify financial jargon and debunk common financial myths, becoming every family’s first stop for financial advice, information and inspiration.