There are different types of cover that fall under the broad heading of life insurance:
Life cover – also known as term life insurance or death cover, pays a benefit in the event of your death or on diagnosis of a terminal illness. Term life can help cover your family for expenses, such as rent or mortgage payments. It helps secure your family’s future if you’re no longer around. The money will go to the people you nominate as beneficiaries on your policy.
Total and permanent disability (TPD) cover – covers the costs of rehabilitation, debt repayments and the future cost of living if you are totally and permanently disabled. TPD cover is often bundled together with life cover.
Trauma cover – 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, stroke or heart attack. It is also referred to as ‘critical illness’ cover or ‘recovery’ insurance.
Income protection – replaces the income lost through your inability to work due to injury or sickness. It is designed to help you avoid the financial stress of drawing down on your assets, or taking on more debt, if you were to suffer from a temporary illness or injury that prevents you from working, or increases your expenses. These payments replace a portion of your regular income and could be used to pay rent or mortgage payments, day-to-day living expenses and medical expenses. Alternatively, payments could be used to pay for a professional to perform household duties.