AMP has shared with us this video that will talk you through the basics of insurance. You can watch the video here or read the transcription below.
I’m Chris and I work for AMP. There are four kinds of personal insurance every Australian should understand. Probably the best way to explain these is to tell you the story of a claim I know well. It involves a couple from Country Victoria who were caught in the catastrophic Black Saturday bushfires in 2009. I’ll call them Malcolm and Judy.
They were in their car literally trying to outdrive the bushfires. Regrettably, they both got trapped. Now, while they both survived, Malcolm suffered third degree burns to 22% of his body. When this happened, Malcolm had the four types of insurance. He had life insurance, total and permanent disability cover, and income protection through superannuation. He also had trauma cover. While Malcolm had these four types of insurance, obviously, everyone is different and should seek their own financial planning advice.
First, life insurance. Malcolm was very fortunate that he didn’t die, but if he had, then his life insurance would have protected his wife from the financial impact. Most people understand life insurance and a lot of us have it through our super. It’s a payment to a beneficiary, generally, if you die or become terminally ill.
Second, total and permanent disability cover. The good news was that Malcolm was responding to treatment and would be able to get back to work soon, but if he had been permanently disabled, then, his cover would have paid him.
Third, income protection. Obviously, Malcolm was in no shape to keep working during all this. His income protection paid him a monthly benefit while he was not working during his recovery. I think Malcolm was paid in the order of $8,000 a month.
Fourth, trauma insurance. Few Australians are aware of it, but Malcolm had trauma cover, and it was a big help to him. With the severity of his burns, he immediately qualified for benefit, and we paid him $609,000. It can be a big help as you adjust your life whether you’re recovering from cancer, a heart attack, or in Malcolm’s case, severe burns.
Now, Malcolm and Judy were like a lot of Australians in their prime of life. They didn’t expect anything bad to happen, but it did, and if they’d been like a lot of us and had never really looked at the insurance they might need, well, they’d be in great financial stress now.
The great news is, they did think about it. They recognized that these events might occur and they insured against them and with the benefit, I can tell you Malcolm and Judy were able to buy a home, and Malcolm didn’t have to worry about money during his recovery process. So, for Malcolm and Judy, having these four types of insurance in place was very, very smart.