Easing Financial Hardship Through Insurance

There are plenty of different ways in which Australian families can fall into financial hardship.

Some come into hardship through losing their job, whilst others may be there as a result of poor financial decisions.  One of the most common ways to enter financial hardship is through losing an income.

Income can be lost in a number of different ways.  You or your partner may be unable to work due to injury or illness, or you may lose an income due to the death of a family member.

Whilst it may be too late if you are already in this position, there are things that you can do to prevent it occurring again.

Temporary Illness or Injury

A temporary inability to work due to injury or illness can strike anyone at any time, regardless of how old you are or how fit and healthy you think you are.

If an injury or illness left you unable to work for a few months, or even a few years, most Australian families would struggle to maintain the mortgage or rent and keep food on the table.

This risk can be covered with income protection insurance.  This form of insurance can replace up to 75% of your income if you cannot work due to injury or illness.

A temporary inability to work can quickly lead to financial hardship, but with income protection you can ensure that you and your family are looked after during this period.

Major Illness

A critical illness such as cancer can quickly derail an otherwise healthy financial position.  When a family has to drop everything in order to concentrate on a critically ill family member, their financial position can suffer in a major way.

There is a form of insurance designed to specifically cover this situation, and it is known as trauma insurance.

Trauma insurance will payout upon diagnosis of a critical illness, and can provide you with sufficient funds to put the mortgage well ahead on repayments and cover any costly out-of-pocket medical expenses.

Permanent Disability

When a family member suffers an injury or illness so serious that they are unlikely to ever return to work, there can be major financial implications for the family.

In many cases there will be a Centrelink disability pension available, however this may not be sufficient to cover the mortgage and other expenses, and could ultimately lead to severe financial hardship.

This risk can be covered by TPD insurance.  TPD stands for total and permanent disability, and the insurance is designed to cover you if you suffer an injury or illness that leaves you unlikely to ever be able to work again.

The proceeds from a TPD insurance claim can be used to extinguish your mortgage and other debts, and in conjunction with an income protection policy it can help to replace your income for the rest of your life.

Death

The passing of a loved one can be emotionally devastating, and if it happens to be the main income earner for the household it can quickly lead to financial hardship, which is the last thing you need at such a stressful time.

All families should have life insurance in place to cover this situation.  A properly structured policy should ensure that all debts and liabilities are cleared immediately, along with a financial buffer to cover the family’s living expenses for a period of time.

Using Insurance

As we can see, insurance can play a vital role in keeping us out of financial hardship.  Unfortunately there are many things that we cannot insure against, but for those that we can it certainly pays to be protected.