Page 82 - Smart Money

Chapter 4

$ Trauma or medical crisis – they are called both, but they are the
same thing. These are generally significant health issues but things
that people can bounce back from, such as heart attack, cancer,
stroke. They are the big three and they account for about 80% of
cases. You can have a heart attack, or you can fight cancer and have
a good success rate and a good life expectancy beyond that, but
the short term financial impact can be quite severe. It can be in the
hundreds of thousands of dollars to attack cancer and even if you
beat it, you are still $100,000 worse off
If I were to prioritise them, I would say income protection was the most
important. If you talk to anyone about their financial circumstances
for more than five minutes, you will generally talk about things that
require income, things like repaying a loan, funding a retirement, raising
or educating kids. All of that revolves around someone generating an
income. We tend to take our salary for granted, but if we lost it, it would
have a huge impact on our lives.
Death cover is pretty self-explanatory and the worst case scenario. If
someone is diagnosed with a terminal illness and they are not likely to be
around within 12 months, you can make a claim before they die, get the
lump sum and start putting it to good use, whether that means reducing
debt or putting money aside for children or partners.

With a total, permanent disablement, the benefit provides a lump sum
that is designed to cover treatment or rehabilitation if they are going to
need it on an ongoing basis.

For example, if someone is a quadriplegic or in a wheelchair, that person
is very likely going to need to have their home adapted and renovated to
accommodate that change to their lifestyle. Total permanent disability
and income protection go hand-in-hand. In that situation, you have the
rehabilitation costs and the medical cost as a lump sum, but you also have
an ongoing need for income. When income protection kicks in, ideally
it generates monthly income that covers living costs, whereas the total
permanent disability lump sum benefit is there to cover those one-off
costs.

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