How to create a financial safety net for your health

What is the biggest potential threat to your family’s financial security?

If you think the biggest threat to your family’s personal financial security is premature death, then think again. Unfortunately, total and permanent disablement can happen to any of us and the financial impacts may be greater than you think.

Keeping your loved ones financially protected against ‘big ticket’ risks in life should always be a priority in financial planning. It is never a pleasant thought, but most of us are aware that life insurance provides an important guard against financial disaster if a breadwinner or homemaker passes away prematurely.

Then there is the risk of a temporary sickness or an accident, which many working people will choose to counter with income protection insurance. However, is there an even greater threat that may go unattended?

A really serious injury or illness may end up preventing you from ever returning to your job. In technical terms this is known as a ‘total and permanent disability’ (TPD) and it could result in a host of costs on top of the loss of a lifetime’s income, potentially making it a severe financial burden.

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Having a safety net in place in case a loved one gets sick can assist with the burden of medical costs

What could cause a total and permanent disability?
The most common conditions which cause total and permanent loss are spinal injuries that result in paraplegia or quadriplegia. A nasty car crash or work accident could see any of our lives change in an instant. The causes of TPD, however, can be far wider than those. Certain types of cancer can be equally debilitating and neurological, cardiovascular and mental illnesses can also result in a total and permanent disability.

What are the financial impacts?
Just like premature death, the largest component of financial loss is the fact that the person cannot ever return to their gainful employment and a lifetime of pay packets suddenly evaporates. That means no income to pay the mortgage and debts, cover the school fees, buy the groceries and fund other living expenses. This can leave you reliant on such things as sick leave, social security and charity, which doesn’t even come close as a replacement for your ability to earn your own income for the rest of your working life.

But the expenses don’t stop there. Major medical conditions can attract massive medical costs, which may not all be covered by health insurance. Such costs can be a long-term expense on top of your living costs and can be even greater if you want to seek top medical care or unconventional treatments overseas.

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A major medical problem can cause serious financial strain

The list goes on
Some conditions may even require alterations to your home in order to accommodate ease of living. Ramps, doors, kitchens and bathrooms may all need to be adapted. The costs can be staggering. Then there may be specialised equipment needed to aid mobility or even medical equipment to be installed in the home, rather than relying on external treatment visits.

Additional therapies such as physiotherapy or rehabilitation specialists may help aid recovery and improve independence. External help may also be required for nursing and home care and even assistance with gardening and maintenance. Just getting out and about can potentially create a need for special transport. The costs quickly add up.

How TPD insurance can help
The potential for the cost of suffering from a TPD event can quickly outstrip the cost of premature death. If you have income protection you may be able to fund basic living costs to some degree, but it is unlikely that it would cover the long list of other extraordinary costs that your condition could generate.

TPD insurance is the most effective way to protect against the possibility of a totally and permanently disabling condition. It provides a lump sum that can be used in whatever way you like to cover income replacement, debt reduction, living expenses and all the additional capital and ongoing costs related to recovery and making life as comfortable as possible

Assessing the possible financial costs and packaging TPD cover together with your other personal insurances is something that a professional adviser can help to take care of with minimum fuss, so it really is not worth the risk of leaving such a major risk exposure unattended.

What are your biggest questions when it comes to coping with a total and permanent condition? Join the discussion below.