“Shallow men believe in luck.
Strong men believe in cause and effect.”
Ralph Waldo Emerson
Enjoy life, but make sure your family is protected
Risk management and Insurance planning are the most ignored topics within financial planning.
So why is that?
Most of us don’t like talking about personal insurance because it cost us money and we view this cost as “wasted money”. But in reality it is only wasted until the moment we need it.
Unfortunately at that point it is too late, usually lack of personal insurance creates a financial disaster and a great deal of stress.
Also insurance is not as sexy and exciting as planning to create your investment portfolio, building your nest egg or buying your home or investment property.
Only half of Australians have life insurance and of that, 65% have it as a default via their work super. In most cases it is not sufficient to cover financial debts and leave surplus for the family survivors.
What this means is that more than half of Australians would need to rely on Centrelink assistance if a family member suffered a terminal illness, health trauma or passed away.
Current Disability Pension payment is less than $400 per week per person. Could you survive on such income if anything happened to your family?
Your family is your responsibility – don’s risk your family wellbeing.
No liability should ever outlive its creator.
Types of insurance to consider:
This benefit should cover at a minimum all your outstanding loans, plus additional funds for the family income needs should the main income provider pass away.
Total & Permanent Disability Cover
This benefit should cover all outstanding loans and additional funding to cover any possible medical cost.
This policy provides a lump sum if you suffer one of the major health traumas such as heart attack, stroke, cancer. These days the list of traumas included within policies is quite extensive, but over 80% of claims are due to the above listed three major traumas. This benefit should cover any outstanding liabilities as well as additional lump sum for medical expenses and possible personal expenses due to suffered illness.
This is the only policy with premiums being tax deductible for every tax payer, which should make the policy most attractive to every person working. In my view it is the most important policy one could have. At the end of the day, what is more important that your ability to earn income. Unless you have sufficient income producing assets that can substitute your professional earnings, Income Protection policy should be the first policy you start when you commence employment or start your own business.
But deciding to commence insurance policies is just the beginning. There are number of issues that I discuss with clients to ensure the highest benefit at the most efficient price has been provided as well the best insurance policy with the most appropriate benefits has been chosen.
Issues discussed when deciding on insurance policies:
- How much cover is required?
- How much can you afford to pay for it?
- Should the cover be organised via superannuation (where possible) or owned directly by life insured?
- Who should become the policy owner (if applicable)?
- Who should be listed as a policy beneficiary (if applicable)?
- Is an indemnity policy appropriate or should it be guaranteed renewable?
- Which insurance company is the best for the level of cover and your occupation?
- Is there a difference in medical definitions between policies?
- Which insurance companies have the best history of claims?
- What about your medical history?
I am extremely passionate about insurance. My father suffered a heart attack when he was in his 40s. He has not worked since. My mother was forced to work two jobs to provide for them and to build some savings for their retirement. Neither of them had any choice, back then no Income Protection insurance policy existed. But seeing the difficult life they experienced, I want to make sure that none of my clients will ever have to face such worries in their lives.
Hoping for the best is NOT a plan