Life would be much easier if we knew what the future holds for us. We would know when to save, spend or invest. In the event of a prolonged sickness, injury, permanent disablement or even death we would be able to adjust our lifestyle accordingly to ensure that it is never compromised by these events.

Not knowing our tomorrow, we have two choices about how we can protect our financial future. We can self-insure, which means we will always need to have sufficient savings or investments that could be converted to cash easily for the purpose of maintaining our lifestyle if we were unable to generate current levels of incomes to fend for our families.

The other option would be to transfer the risk to someone who will take over the financial burden for us if any of these life events occurred. This can be achieved by buying an insurance policy through one of ma­ny life insurance providers. I believe the main challenge each of us faces is trying to identify which type of insurance is the most important. To assist you with your decision, this article looks at the five main types of life insurance covers which are; income protection, total and permanent disability, trauma, child cover and death cover.

Income Protection Cover

Income protection insurance replaces the income lost through your inability to work due to injury or sickness. It is an important consid­eration for anyone who relies on their income to support your family if you were either sick or injured and needed to take some time off work. Income protection insurance normally covers up to a maximum of 75% of your income although the choice is yours as to what per­centage of your income you want covered as long it does not exceed the 75% mark.

Total and Permanent Disability (TPD) Cover

Total and permanent disability insurance cover is designed to provide financial protection in the event of a serious injury or illness that would make it difficult or impossible for you to continue to work. If this hap­pens and you did not have this cover, you will need to find a way to support yourself and your family.

Total and permanent disability (TPD) insurance provides cover if you are totally and permanently disabled in line with the TPD definition of your cover. Most TPD policies are issued with one of two definitions, being ‘own occupation’ or ‘any occupation’. It is up to you to choose a definition when taking out your policy.

Under the ‘own occupation’ definition, the insurer pays an agreed benefit when the individual is unable to perform the duties of their own occupation. For example, a surgeon who loses his left arm may still be able to practice as a general practitioner but he will suffer a significant drop in earnings.

Under the ‘any occupation’ definition, the insurer pays an agreed benefit when the individual is unlikely to engage in gainful employment for which they are reasonably qualified by education, training or experi­ence as a result of the disability.

TPD insurance will help you cover the costs of rehabilitation, debt re­payments and the future cost of living.

Trauma cover comes into play when a serious illness can make it difficult or impossible for you to continue to work. If this happens, you will need to find a way to support yourself and your fami­ly. Trauma cover can provide a financial safety net.

Trauma cover is also referred to as ‘critical illness’ cover or ‘recovery’ insur­ance. Trauma insurance provides cover if you are diagnosed with a specified illness or injury. These policies include the major illnesses or injuries that will make a sig­nificant impact on a person’s life, such as cancer, heart attack or a stroke.

Trauma insurance pays a set amount. This can be used for things like:

• Any private medical costs above your health insurance
• The ongoing cost of any therapy and special transport costs
• Adjustments to housing and lifestyle changes
• Debt repayments

Child cover

Child cover comes under the umbrella of trauma cover. Usually child cover can be provided as an addition to a parent or guardian’s policy. It comes at a small increase to your premium, but protects your family from a financial burden in the event of serious medical conditions af­fecting your child.

Insurance for your child covers a number of different trauma condi­tions, and usually includes: death, cancer and heart conditions. Addi­tional conditions may vary depending on the insurer. In order to apply for this type of cover the child’s age has to be between two to 15 or 16 years old. This cover expires once the child has reached the age of either 20 or 21 depending on the chosen insurer’s conditions.

Death Cover

Talking about dying isn’t easy but in view of those you will leave be­hind, it’s worth some thought. By setting up a way to support your loved ones after you die, you can ensure they can continue to pay the mort­gage and school expenses, go on holiday and buy essentials.

Death cover, also known as term life insurance or life cover, pays a set amount of money when the insured person dies. The money will go to the people you nominate as beneficiaries on your policy.

When deciding how much life cover you want, think about:

• All your debts
• Your children’s future childcare and education costs
• How much income your family will need to live comfortably