Insurance hacks: your guide to personal insurance

It feels like insurance companies set out to bamboozle us with language and products that are complex and difficult to understand. This guide explains the types of personal insurance you might come across, helping you to decide which is right for you.

You had fewer responsibilities when you were younger. You earned a bit of money, lived within your means (besides the odd holiday blow-out), and could probably afford to stop working for a while without running into debt. Good times, huh?

Now responsibilities orbit you like planets around the sun: a mortgage, debt repayments, school fees, car maintenance costs and so on. The "you" may now be plural-kids, a partner, a dog. When did things get so complex?

So now it'd be a problem if you weren't earning for a while. This is where personal insurance comes in: it can be a little back-up when things go a bit off-track.

Protect your income if you suddenly can't work

Income protection insurance ensures you still receive an income if you suffer a serious injury or illness and can't work for a while. You could receive up to 75% of your normal pay, based on how much you were earning over the last three years or the amount agreed when you took out the cover.

This doesn't cover redundancy, but you can pay a bit more to add this to your policy.

Receive a lump sum for serious illnesses

Trauma protection provides a lump sum if you're diagnosed with a serious illness, such as cancer or heart disease. You can use this to pay off a mortgage or debt, contribute to medical expenses or rehabilitation, or however else you see fit. This allows you time to focus on recovery and family, without worrying about spiralling costs.

Guarantee your family's financial wellbeing if something happens to you

Term Life Insurance supports your family if you become seriously ill or injured, or pass away. You and/or your family can receive a full payment if you become terminally ill or pass away. Alternatively, if you're ill or injured and can't work you can opt to receive regular payments. Term Life Insurance policies can see you through a fixed number of years. They have a fixed expiry. For some insurers it's when you turn 65, others it's higher, often when you turn 100.

A little control over what the future might bring

The future is notoriously unpredictable, but you don't need to worry, you just need to get prepared. Purchasing personal insurance can help to offset concerns for what the future might bring - and replace it with security.

More information

Information contained in this article is correct at the date of publishing and is intended as general information only. This article does not take into account your current financial situation, and goals and is not personal advice.

Author bio

Richard Allardice is a writer and former professional explainer (school teacher) working at Springload. He's been involved with banks his whole life, because that's where he keeps his cash. Read more of his work.