We all go through our lives anticipating we’ll always have the ability to work and earn an income, allowing us to care for not only ourselves but also our loved ones – now and into the future.

But what happens if you lose the ability to earn an income? How can you protect yourself and those who depend on you?

This is where having personal risk insurance can be of assistance.

Depending on the type of cover, personal risk insurance can help you replace your lost income, fund the cost of ongoing medical care, or help with continued living expenses for you and your loved ones.

There are four personal risk insurance categories:

• Life insurance: a lump sum amount to help your family continue to pay for the necessities in life, from the basics of food and accommodation, to covering the cost of future education.
• Total and permanent disablement insurance (also known as TPD): pays a lump sum amount in the unfortunate event of permanent disability due to illness or accident. TPD insurance covers medical treatment, pharmaceutical items, specialised therapies and rehabilitation costs that may not be covered by your health fund. It can also provide financial support for general ongoing living expenses for you and your family.
• Income protection insurance: this replaces your income if you are unable to work due to sickness or injury by providing a monthly payment of up to 75% of your pre-tax income.
• Trauma insurance: pays a lump sum on the diagnosis of a specified illness or injury such as a heart attack, stroke, cancer and paraplegia.

To answer your most commonly asked questions, we sat down with Tom Moloney, Financial Adviser – Wealth and Capital Markets, Australian Unity, to discuss how you can best protect yourself and your loved ones.

So, why do people need personal risk insurance?

“For most working Australians, the single biggest asset, perhaps outside of their home, is their ability to turn up to work and generate an income,” Tom says.

“If someone is prevented from working through death, injury or illness, then they and their loved ones could face severe financial hardship with potentially irreversible economic consequences.”

“The financial impact of such an event compounds an already emotionally challenging and distressful time. What’s worse is the flow-on effects of financial hardship can cause long-term detriment to everyone, mentally, socially and emotionally.”

What personal risk insurance does is help protect people and their families against such potential risks.

Tom says the effects of the COVID-19 pandemic have also impacted people and their view of risk insurance.

“I’ve noticed the pandemic has prompted Australians to think seriously about their finances and plan to grow their wealth position,” Tom says.

“What I believe requires equal attention is a plan to protect their wealth position.”

What options are there for people looking to obtain this kind of insurance?

While home, car, contents and health insurances are fairly common across most households, Tom says the same priority is not always given to personal risk insurances.

“There are many options to consider when thinking about personal insurance, as they come in different forms across a number of providers,” Tom says.

“No single policy and amount of cover is right for everyone. To understand what might be right for you, it is recommended you seek professional financial advice.”

Personal insurance, unlike general car or contents insurance, is tailored to protect the individual taking out the policy. Because of this, it requires personalised financial advice to help understand the right types of personal insurance and the amounts of cover required.

A suitably qualified financial adviser who specialises in risk insurance can provide this support.

In addition, financial advisers will act for you by providing assistance with applying for cover, navigating the underwriting process and liaising with insurance providers.

Importantly, an financial adviser will also be there for you if you ever need to make a claim and will always be in your corner when dealing with insurance providers.

“A good starting point is to understand whether you already have personal insurance,” Tom says.

“Most Australians already have default life and disability cover through their super funds. However, these insurances are often insufficient and would barely cover a mortgage.

“A professional financial adviser can help you understand whether this is right for you, and if you may be underinsured.”

Is personal risk insurance expensive?

“When you actually consider the risks of not taking up personal insurance, it is far more expensive to have no cover should you ever need to claim,” Tom says.

“However, constraints on household budgets and the need to keep cover affordable is very understandable. Personal insurance can be customised to meet your budget requirements. That’s why working with an adviser can help you find the right balance between affordable cover and appropriate protection for your needs.”

As you age, your insurance premiums will rise but Tom says there are options available to keep cover affordable over time. In addition, it is important to periodically review your personal insurance covers to ensure they remain fit for purpose.

Tom also notes that not all insurances can be payable via your superannuation. Life, TPD, and Income Protection insurances are all payable, however trauma insurance is not.

“A good adviser will work with you to provide long-term service, support and advice in relation to your insurances to meet your ongoing needs as they change over time,” he says.

“We have a team of highly skilled financial advisers who will consider all your options and provide advice that is tailored to fit your needs and ensure you are appropriately protected.

“It’s important to understand the longer-term tradeoffs of paying via super vs cash and making sure you review this year to year with your financial adviser."

Need help with your personal insurance?

Get in touch with one of our financial advisers today about reviewing your personal risk insurance and ensuring that you and your family will be taken care of. Simply call us on 1300 700 189 or email to arrange an appointment.