When considering life insurance, many wonder if it’s possible to get payouts from multiple insurance policies, such as Life, Total and Permanent Disability (TPD), Critical Illness, and Income Protection (IP) Insurance.
The answer is probably yes you can receive multiple payouts from different insurance policies for Life, TPD and Critical Illness insurance, but understanding the terms, limits and offsets of your policy and the interplay between each is important to effectively manage your financial protection.
Life Insurance in conjunction with other policies
Life Insurance is designed to provide financial support to your beneficiaries in the case of your death, or to you if you were to be diagnosed with a terminal illness. Depending on your individual circumstances, it can usually be claimed alongside other insurance types if the terms and conditions of the policy are met.
TPD Insurance
TPD insurance pays out a lump sum if you become totally and permanently disabled and are unable to ever work again. This insurance can be linked to your Life Insurance or taken as a standalone policy, and can be used to help fund your daily living expenses and any home modifications required.
Your Life Insurance can then provide a separate payout to your beneficiaries in the event of your death.
Please be aware, certain benefits that are linked to life cover will reduce both benefit amounts once claimed, to minimise the impact of this, you are able to put a buyback clause on certain policies to purchase the life cover component back.
Critical Illness Insurance
Similarly, Critical Illness insurance pays a lump sum upon the diagnosis of a defined serious illness, such as a heart attack, stroke, or cancer. This can help you manage the financial implications of your illness, such as medical treatments, daily expenses, and taking financial pressure off you so you can focus on your recovery.
If your illness leaves you permanently disabled and unable to work again, you may be able to make a claim on your TPD insurance. Down the track, if you are diagnosed with a terminal illness, you may be able to claim on your Life Insurance as well.
Please be aware, certain benefits that are linked to life cover will reduce both benefit amounts once claimed, to minimise the impact of this, you are able to put a buyback clause on certain policies to purchase the life cover component back as well as the critical illness benefit not including the condition you originally claimed on.
Income Protection Insurance
IP insurance provides a regular monthly income if you’re temporarily unable to work due to illness or injury. While IP supports you during a period of temporary incapacity to keep up with bills and keep your household going.
Life Insurance provides a separate payout in the event of your death, regardless of previous IP claims. If your disability becomes permanent or is due to a defined critical illness, you may also be able to claim on your TPD and/or Critical Illness insurance.
Insurance companies will only allow a maximum payout of between 70-75% of your income to be covered, so if you have multiple policies, you may have an issue come claim time as this will be the maximum amount covered and you may need to show evidence of your income before the claim.
Coordinating multiple insurance policies
Understanding terms and conditions: Each policy has unique terms and conditions. It’s important to understand these so you know the circumstances under which you’d be eligible to make a claim.
Purpose of coverage: Each insurance type serves a different purpose, addressing various aspects of financial protection. It’s important to get the right types of cover to suit your personal circumstances so you’re confident that you and your loved ones are financially protected. I can help you find the right combination of Life, TPD, Critical Illness, and IP insurance to suit your needs.
If you like this article, you may also be interested in:
https://www.rpwealthmanagement.com.au/right-insurance/
https://www.rpwealthmanagement.com.au/tailoring-life-insurance-as-you-age/
https://www.rpwealthmanagement.com.au/what-you-need-to-know-about-making-your-will/
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