What is personal insurance?

There are four types of personal insurance cover to consider:

Life insurance (or death cover)

Pays a lump sum to your beneficiaries in the event of your death - important to consider if you have dependants. Term life insurance provides a lump sum benefit (amount insured) on the death of the person insured or where there is a terminal illness clause, in advance of a certain death (i.e. terminal illness with 6 or 12 months' life expectation.


The cause of death is irrelevant unless it is by suicide in the early stages of the policy (e.g. within 13 months of taking out the policy). People from age 11 to 75 are usually eligible for term life insurance and policies can often be renewed to age 100.



Total and permanent disablement cover

Pays a lump sum if you’re no longer able to work due to total and permanent disablement - important to consider if you have any large ongoing debts, such as a mortgage, and family to support. The total and permanent disablement (TPD) insurance, also known as Permanent Disablement Benefit, also provides a lump sum. This amount, called the sum insured, which is chosen at the outset, is paid if certain criteria of disablement from the ability to work are met.



Trauma insurance

Pays a lump sum if you’re afflicted with a specific illness such as heart attack, stroke or cancer - provides peace of mind for you and your dependants. Trauma insurance, or crisis recovery insurance, provides a one-off lump sum payment when the insured person suffers from a specific medical condition or event that is specified in the policy.

The main purpose of trauma insurance is to ease financial burden associated with recovering from prescribed trauma events by paying for medical expenses, serious debts to assist with faster recovery and allow any lifestyle changes due to the debilitating trauma e.g. wheelchair access to the house.



Income protection insurance

Provides a monthly income when you’re unable to work because of injury or illness - important to consider if you’re the main financial provider in your household. Depending on the structure of the policy and the extent of the disability the insurance may pay for a week, year or lifetime. Income protection allows a person's lifestyle to continue if their ability to work is impaired. Investment income is not included, only income from the insured persons' 'personal exertion'

An insured person must be in employment to purchase this style of policy, either self-employed or an employee, but must be full-time or at least 25 hours per week. A person performing full time home duties is unable to purchase this type of policy. Ages 16 to 60 are the usual candidates with policies generally renewable to age 65.

Applicants can insure up 75% of their earned income over the last 12 months, which is depends on whether the insured is:

  • PAYG. Total employment package including pre-tax remuneration, fringe benefits, salary, superannuation and other fees; and
  • Self Employed. Average monthly income due to personal exertion, less the related share of necessary business expenses.