Think of life insurance as the four legs on your dining table – one or two isn’t enough, you could get away with three, but four is the ideal. Life, Trauma, TPD and Income Protection insurance each have their own merits, but combining all four gives you and your family protection against a greater number of risks.
Bundling brings benefits
One of the benefits of bundled insurance is the comprehensive protection it provides. Each policy is designed to give protection for different needs, which is why linking them together gives you cover for a much wider range of risks.
- Life Cover pays a set amount of money when you die to whomever you have nominated as beneficiaries of your policy
- You could combine this with TPD (Total and Permanent Disability) for the additional benefit of a lump sum to help cover the cost of rehabilitation and debt repayments if you become totally and permanently disabled
- Add in income protection and you could receive a steady income stream if you are unable to work for a period of time because of injury or illness
- Round it out with trauma insurance. Trauma pays a lump sum to support you if you have a major illness that will have a significant impact on your life, such as cancer or a heart attack.
Compared with standalone insurance, linked insurance offers lower* premiums and the simplicity of managing only one policy. There is one, not multiple, premium payments and there is a single point of contact when you make a claim.
* Amount of premium will vary and depend on your individual circumstances. This information is general in nature and cannot be construed as credit or financial advice. It does not take into account your goals, needs, objectives and financial situation. Consider your own circumstances before making a decision. You should read the Product Disclosure Statement (PDS) and obtain independent legal and financial advice before making a decision.
But there’s a downside
If you need to make a claim on one policy, you may lose the opportunity to claim on your life policy in full.
For example, let’s say you have $750,000 TPD cover and $1 million Life Cover as part of a linked policy. You make a claim for TPD and a payout of $750,000 is made. In most cases your Life Cover would then reduce by the claim amount as it is considered a shared risk. So instead of $1 million in Life Cover, you would be left with $250,000.
The good news is that many insurers offer a way around this with ‘buy-back’ – see below.
What is buy-back?
Some policies allow you the option to ‘buy-back’ the life insurance benefit that is reduced when a benefit is paid from your bundled TPD or Trauma policy. Depending on the insurer, you may have to wait 12 months for the cover to be reinstated.
If you prefer to skip the waiting period, ‘double TPD’ gives you the option to have your life insurance benefits reinstated immediately following a claim.
Restrictions and conditions for buy-back and double TPD vary from policy to policy.
Linking with super fund policies
Most superannuation policies include Life and TPD insurance, but the level of cover is limited.
If you want to extend your cover, a flexi-linked or super-linked policy will allow you to link your cover in and out of super. For example, you can hold a trauma policy outside super, but link it to a life policy inside super.
Alternatively, you might want to split a single policy across the super and non-super environment. This allows you to gain access to benefits that wouldn’t normally be available if the policy was entirely through your super.
There’s a maze of options when it comes to choosing your life insurance plan. Your Yellow Brick Road Wealth Manager can save you time and help you avoid potentially costly mistakes. We’ll look at your goals and needs for the future and offer a tailored plan of action for protecting you and your family.