Nick Bruining: The work insurance cover you should have for peace of mind just in case disaster strikes – The West Australian


While death cover is the backbone of a properly constructed portfolio of life insurance, the other three types of cover shouldn’t be ignored.
By far the most common is disability insurance, which pays out on total and permanent disability such as quadriplegia or loss of sight.
The definition of disability varies and these seemingly subtle variations can result in some claims being rejected. Some policies provide a payout when the disability prevents you from doing your usual job, while others pay only when you can’t work in any job.
Superannuation fund disability policies are usually the latter and these definition differences are often behind many disputes between insurers and claimants.
Trauma insurance pays out on diagnosis of certain medical conditions or specific traumas. This might be a heart attack, a stroke or even severe burns. The point here is that you may end up returning to work after recuperating.
Income protection insurance covers your employment income and that can extend to business expenses if you are self-employed.
To encourage you to return to work, you can typically only insure up to 75 per cent of your gross income. Waiting periods and how long the benefit pays out for can make dramatic changes to the premium paid.
If you are looking to save money here, it’s best to tweak the waiting-period variables, rather than tinkering with the amount of the monthly benefit you might receive. If you wait three months for the benefit payments to kick in after making a claim, you’ll be better off that way than only receiving half of what you actually need, particularly if you can’t work for years or ever again.
In the case of all life insurance-type policies, the riskier your lifestyle and perhaps your history, the more you’ll pay. An overweight, bungy-jumping smoker can expect to pay big bucks for cover.
Finally, big savings can be made if you make use of legally independent financial advisers. Under financial advice laws, these advisers are prohibited from receiving commissions of any sort and that can mean premium savings of up to 35 per cent on a new policy.
Equally, independent advisers who “take over” an existing policy which pays a commission are legally required to refund the commission to the client within 90 days.
You’ll end up paying fees other ways but there are many examples where the client ends up saving money overall.
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© West Australian Newspapers Limited 2022



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