Insurance is one of the most important foundations of any worthwhile financial plan. All financial plans no matter how elaborate can fall apart as a useless exercise if a disaster were to strike and there were no insurances in place to protect you from financial devastation. Insurance is therefore the difference between survival and poverty no matter what other plans you had laid out for your financial future.

Very few people would buy a home, a car, or any other possession that they consider valuable and risk losing it by not taking out insurance to cover the risk of anything happening. When you think of it, your life is the most valuable asset you have, both to yourself and to those who depend on you. If you were to die your contributions to your family’s way of living would die with you if you were not sufficiently insured to have them protected financially against losing what you would have provided, had you remained alive. The same goes for yourself, if you were to become incapacitated to such an extent that you couldn’t earn an income any more. Where would it leave yourself and your family? Insurance takes away such a risk and no matter what was to happen to you in the future, your finances would remain intact.

The Five Basic Life Insurances

There are five basic life insurances that are available to make your life financially secure no matter what happens to you in a physical way, these are:

1. Term life insurance.
2. Total and Permanent Disablement (TPD).
3. Living (trauma) insurance.
4. Income protection.
5. Business overheads.

Term life insurance gives you, or your family, cover in two ways:

1. It will pay you the amount you are insured for if, within the term of the cover, you became diagnosed with contracting a terminal illness and
2. It will pay your beneficiaries the same insured amount if you were to die before the term of insurance expired.

The proceeds of a term insurance pay out can be used for any purpose whatsoever, on most occasions it is used to pay out the mortgage on your home. This ensures there will always be a roof over the families head. If you are renting it can be used to purchase a home or to pay ongoing rental payments. Whatever is decided the family can be assured it will be able to continue in its accustomed lifestyle as if you were still with them. An amount of $750,000 can be achieved, on most occasions, for little more than a the cost of a mug of coffee a day, depending on your age and health when taking the cover out.

The most common usages the proceeds of term insurance are put to are:

• Invest the whole amount and use the interest as income replacement.
• Cover the costs of bringing up children such as education and clothing etc.
• Clear all debts so that the family is debt free as well as pay the funeral costs.

The main benefits obtained with term life insurance include:

• Death and terminal illness benefit.
• Funeral money advancement while your family is waiting to have the total amount of proceeds cleared.
• Disability cover can also be attached along with living insurance benefits.
• As it is term insurance it will need to be renewed when the term expires and this renewable aspect is guaranteed.
• Any future benefit you may want to have included including business events is also guaranteed.
• Inflation protection is included meaning that the pay out will always represent the real value of the cover which complements the included financial planning benefit.
• You are able to nominate whoever you want as being beneficiaries.
• The added luxury of having buy-back  as well as multi-link benefits.

Total and Permanent Disablement (TPD) insurance. This type of personal insurance will pay a lump sum amount if it is found you will be no longer able to work due to the disability you have occasioned. It can be obtained as a stand alone policy or be made additional to a term insurance policy

Living Insurance. Living insurance cover is often called critical illness or trauma insurance. The benefits will be paid if you are found to suffer from a list of ailments which include such conditions as cancer, heart ailments and loss of limbs. The full list of medical conditions differs with different policies. This cover can also be obtained as a stand alone policy or be attached to a term life insurance policy.

Income Protection insurance.  A personal insurance that guarantees you will receive at least 75 percent of the taxable income you were receiving before becoming too ill or injured to be able to remain on the job. It will also pay all your superannuation costs while you are off work. The maximum benefit is $3,000 a month and in some cases the premium cost will be tax deductible.

Business Overheads insurance. A similar insurance to income protection for employees. In this case a monthly benefit of $3,000 is paid while you are too sick or injured  to attend to your business. An added benefit here is that you will probably find your premium will be tax deductible.