Do you have personal insurance?
You probably do- right? It’s the least you can do to financially protect you and your loved ones… just in case.
But do you actually understand what personal insurance is and how you and your family can benefit from it?
Of course, insurance terms and conditions vary depending on your insurer and policy. However, there are some common terms and concepts particular to personal insurance that are consistent with every insurance company.
Let’s get down to basics.
What is personal insurance?
Personal insurance is a type of financial option that can protect your family in case you become seriously ill or die.
This insurance is designed to make sure all financial needs are covered in order to maintain a reasonable standard of living for the family.
Insurance plans differ, depending on the insurance company and policy.
However, a typical personal insurance policy will include a combination of elements like:
- death benefits
- cover for total and permanent disability
- options for income protection
- salary continuance
- in some cases, trauma or critical illness insurance.
[ctt template=”7″ link=”UgQcP” via=”yes” ]Tip: Whether you already have personal insurance or you’re in the process of studying the market, make sure you understand the terms and conditions of your insurance policy.[/ctt]
Personal insurance cheat sheet
When it comes to personal insurance, there are a few terms and concepts you might hear repeated. Understanding these key terms can help you understand your insurance policy- which will make the whole process run much more smoothly.
Here is a cheat sheet with all the terms you need to understand when it comes to personal insurance…
It is also referred to as the death benefit cover. Which is exactly that – an amount of money payable in the event the insured person dies.
Total and Permanent Disability Insurance (TPD)
TPD insurance is a single payment provided in case the insured becomes totally and permanently disabled. These TPD insurances vary between insurance providers and policy types.
For example, some TPD covers provide a payment if the insured cannot work at all. Other TPDs provide a payment if the insured can’t continue to do their job due to a disability, but may get a different job in another field.
TPD insurance is designed to help with the costs of medical treatment, rehabilitation, debt repayments and the future cost of living.
Also referred to as salary continuance insurance, this provides financial support in the event the insured suffers from an illness or an injury and isn’t able to work for a certain period of time.
The income protection covers the injured or disabled person through an income stream for a defined period of time. However, there’s a waiting period and a benefit payment period involved.
Also known as critical illness insurance offers a lump sum payment if the insured person is diagnosed with a critical medical condition. Trauma insurance is intended to provide a safety net in order to cover medical and rehabilitation expenses, allowing the sufferer to recover with peace of mind.
If you want to find out more about trauma insurance, see our entire article on this topic – Discover The Whole Truth About Trauma Insurance.
This term refers to the cost of the insurance cover. It can be paid as a lump sum or by instalments.
It’s an automatic increase in your level of insurance cover each year in order to keep up with inflation.
Stepped Premiums vs Level Premiums
You can choose between stepped and level premiums.
What is the difference? Stepped premiums will increase over time whereas level premiums won’t.
A loading can be defined as a cover premium increase. This premium increase can occur due to a pre-existing medical condition or a certain habit that increases the probability of a claim.
For example, if you are a smoker, your insurer will probably apply a loading to your personal insurance policy.
An exclusion is, simply put, something that is excluded from your insurance cover under a policy. This exclusion is often due to its hazardous nature.
For example, a dangerous job or an extreme sport might indicate certain exclusions. You won’t be able to make a claim for illness, injury or death resulting from an excluded activity.
This term is pretty self-explanatory. It consists of the number of days that need to pass before the insurer will start your payment under an income protection claim.
The waiting period depends on the policy. There are also cases where you have a longer waiting period in exchange for lower premiums on your policy.
Underwriting refers to the process through which the insurer assesses the risk of a client in order to determine the level and terms of any cover provided to them.
This usually involves going through a detailed questionnaire where you will be required to provide details about your medical history.
Tip: If you go through this questionnaire, make sure you provide detailed, relevant information. Withholding information can have a negative effect down the line when you will eventually want to make a claim on your policy.
You may also be interested in: 5 Point Insurance Check
It’s the document the insured person receives from their insurer once they purchase an insurance policy.
This certificate should include the following essential information:
- the policy identification details
- effective dates for the policy
- type of insurance cover
- the amount of cover.
Choosing the right personal insurance policy depends on your understanding of it.
Make sure you make the best possible decision for you and your family by becoming financially literate
I am the insurance expert at Shuriken Consulting. I would love to help guide you through choosing the right insurance policy for you, your family or business. Let’s get in touch now.