Insurance Categories

If you can’t work and are unlikely to ever return to work again due to sickness or injury Total & Permanent Disability cover – TPD – will pay you a lump sum. If you add TPD cover onto your death cover you will have better protection than just death cover alone.

There are several definitions of TPD available:

Own Occupation – this is the most comprehensive definition available as it will pay if you are unable to do your own job. Most occupations qualify for this definition

Any Occupation – will pay if you are not working and unlikely to return to any job that you might be suited to by previous training, education or experience

Non Occupational – for certain ‘high risk’ occupations or people not working this definition will cover you if you are unable to perform some of the daily activities of living such as bathing, feeding yourself & mobility.

Trauma cover, sometimes also referred to as critical illness cover or crisis cover, will pay a lump sum upon diagnosis of several listed conditions. Most policies cover around 40 – 50 conditions including the most commonly claimed on conditions of cancer, heart attack and stroke.

There are differences between policies and features that can be added on to tailor the cover to each client.

If you add trauma insurance to death cover with total & permanent disability you will be more comprehensively insured for your lump sum needs.

Don’t have a crystal ball?

No…me neither.

What I DO have are strategies to prepare you for a devastating unexpected illness or injury to help protect you and your family.

Income protection insurance will pay you a replacement income if you are sick or injured and unable to work and earn a living as a result. It is far more comprehensive than workers compensation because you are covered at home, on holidays as well as at work.

Premiums for income protection insurance are generally tax deductible and if you need to claim, the benefit payments will be taxable income.

Income protection policies have waiting periods during which you will not be paid. You can think of this like an ‘excess’ on your house or car insurance – the waiting period is the part of the claim you will have to fund yourself. The longer you can afford to wait before being paid the cheaper the premiums will be.

Key Person Cover is one of three broad elements of BUSINESS INSURANCE. The others are Buy Sell or Succession Planning and Debt Cancellation / Guarantor Protection

Who are the key personnel in your business?

A key person has particular skills, qualifications, knowledge or contacts that are critical to the ongoing success of a business. The loss of a key person can be measured in declining revenue and sometimes also a drop in capital value of the business.

How can insurance help?

Calculate the potential loss of sales, value of major contracts or loss of expertise if the key person was suddenly absent. Add the cost of finding a replacement and remunerating a replacement until they are up to speed. In broad terms this is the total value of the loss to the organisation and this is often the amount that should be insured on the life of the key person.

By using the same types of insurance already outlined, i.e. death, total & permanent disablement and trauma conditions you can make the protection as basic or as comprehensive as you need. Your business will be protected in a broader range of situations if you choose the most comprehensive cover available.

The last thing you want in business is the death or disablement of a partner. Unfortunately it does happen and can easily result in the disintegration of the business.

So what actually happens if a business partner suddenly dies? Or is permanently disabled or is diagnosed with a serious illness like cancer?

Will family of the deceased or disabled partner want cash representing their share of the business and will they want to have a legal battle and wait for years to get it?

Will the remaining business owners want exclusive ownership and control of the business? Will they suddenly be in business with the deceased owner’s spouse or children? Is that a desirable situation?

Most businesses do not have the cash reserves to payout the family of a deceased or disabled partner and this creates enormous problems at an already difficult time.

How can insurance help?

Generally each partner should have insurance cover to the value of their share in the business. If a partner subsequently dies, or is disabled or suffers a serious condition the proceeds of the claim are paid to the policy owner (or their estate/family) in exchange for their share in the business which transfers to the remaining owners.

Businesses use debt to fund expansion or purchase assets. Banks supply the funds to business but they want security and they want as much of it as they can get.

Often business owners will have loans secured against not only business assets but personal assets such as the family home. In other situations guarantees have been given by the business owners or third parties to secure the finance.

If a partner dies or is disabled unexpectedly the business suddenly has multiple problems:

• Loss of revenue or contracts & cost of finding a replacement (covered in Key Person Cover).
• Finding the cash to pay out the disabled partner or their family/estate for their share of the business (covered in Buy / Sell – Partnership Protection).
• Finding the cash to finalise loans in order to release real property or extinguish guarantees

How can insurance help?

When analysing each situation it is important to look at each aspect of the businesses needs. A close inspection of any loans or guarantees is a basic part of this analysis.

Once quantified this need can also be addressed with insurance in the same way as one would for key person or buy sell needs.