What’s the benefit of life, trauma, accident and income insurance?

Life is risky. But without a bit of adventure, things would get pretty boring.

When adventure goes off the rails, the aftermath can have serious consequences. That’s where personal insurance may be able to help.

Even if you don’t have a partner and kids, you still need to be able to look after yourself if disaster strikes. Imagine if you had an accident and couldn’t work? Or you became injured and needed a full-time carer?

How would you cover the cost of living?

Let’s have a quick look at the various insurance options and how they work.

Accident insurance can provide a benefit if you sustain a serious injury in an accident. Policies will usually define a range of injuries from broken bones, to burns, total and permanent disability or even death. And the amount of the benefit payable will normally correlate with the significance of the injury.

It can be a handy insurance for accidents that will wipe out your income earning capacity and when you’re not entitled to compensation from any other source. But read the fine print – most policies will exclude wild child bungy jumping, sky-diving, or reckless behaviour while you’re under the influence drugs or alcohol.

Being diagnosed with a serious illness can really knock you for six. Trauma insurance provides a lump sum benefit for conditions such as cancer, severe burns, heart attack, stroke and major head trauma (just to name a few).

The money will keep the bills paid, while you get back on your feet. You might also need it to access high cost medication, or to cover any out-of-pocket medical expenses after health insurance benefits are paid. It will also take the pressure off and allow you to focus on your recovery.

Income protection insurance helps to keep the home fires burning when you’re sick or injured and can’t work. You can receive up to 75% of your usual income as a monthly benefit. OK, it’s not as great as your full income – but it’s better than the alternative. Depending on the insurer, income protection benefits will be capped up to a maximum amount and have a defined benefit period.

If you’re married or responsible for young children, then life insurance is there to protect your family if you die. It’s a lump sum benefit that’s payable in the event of death or terminal illness. The sum insured could factor in lost earnings, mortgage and other debts, possibly education costs, child care and the cost of living expenses that would fall to your partner or family members.

No-one likes to think of the ‘worst case scenario’. But if it happens – and even if it’s the second-worst-case scenario – personal insurance may help you or the family to cope financially.