A beginner’s guide to life insurances

If you need life cover, you might be overwhelmed by the varying types available. How much cover do you need to be sure of avoiding nasty surprises? Could you pay for more cover than is absolutely necessary? If you’re interested in “lump sum" personal insurance (insurance that pays a "lump sum" once a claim is approved) you may be after Total and Permanent Disability cover or Trauma insurance. These sombre but potentially important forms of cover are explained in more detail in this guide – each has certain limitations and benefits, always particular to each individual policy.

Life Cover

Given the traumatic circumstances under which a claim would be made, no one likes to think about Life Cover. However, despite the morbidity of the subject, Life Cover can provide an invaluable benefit to a grieving family. Life Cover provides a lump sum benefit payable upon the policy holder’s death and these policies are generally renewable each year. This means that the premium is calculated each year and will normally increase as you get older.  When the benefit becomes payable, it is normally paid to the dependents or your estate.  This lump sum could be used to repay debts and/or be drawn upon to create income, thus helping your family to maintain their lifestyle.

Term life insurance, as the name suggests, is a type of Life Cover policy that offers coverage for a limited term. The rate of regular payments on a Term Life policy is fixed for a specified period of time and once the term expires the policy holder must either renegotiate terms for further coverage or forego coverage.

Trauma Insurance

This form of insurance may be available either as an optional benefit on a Life insurance policy or as a standalone policy.  A trauma payment is paid should you suffer any of a number of covered conditions, which may include (but are not limited to) heart attack, stroke, cancer, paraplegia, multiple sclerosis, Parkinson’s disease, chronic liver, lung and kidney disease.  The lump sum could be used to cover debt reduction or elimination, or to cover costs related to making lifestyle adjustments including necessary home or car modifications, medical treatment costs, work alterations and peace of mind.

Total and Permanent Disability (TPD)

Total and Permanent Disability (TPD) insurance cover allows for a lump sum to be paid out if you become permanently disabled in an accident or via an illness. There are limitations based on your policy however in most cases you must be disabled to such an extent that you are unlikely to ever engage in either:

  • Your own occupation; or
  • Any occupation

Life Cover is important so if you want more advice  speak with your insurer or insurance broker about the type of cover you may need. Life Cover, Trauma Insurance and TPD cover are not policy types people usually enjoy undertaking, but they can make the world of difference should the unexpected happen.


This article is about life insurances and is general information only. It should not however be treated as factual, as personal advice or be the basis of purchasing any insurance policy. Before deciding on an insurance policy read the PDS carefully and talk to a licensed insurance agent if you need further assistance. MoneyBuddy does not recommend insurance products or provide personal advice in regards to insurance products.

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