To protect your
family, ask yourself the uncomfortable “what if” questions.
According to research by insurer, MLC, for every home lost
through fire, 3 are lost through death and 48 are lost through disablement.
These are alarming statistics, yet many Australians remain
woefully underinsured for personal risks; such as death, as well as permanent
and temporary health events preventing them from working. This costs our
economy billions of dollars each year.
Personal risk management is a key component of everyone’s
financial affairs. It is a complicated area and you should seek expert advice
from an independent professional, however, the following summarises some of the
- Your future income is your biggest asset, so
before you insure your boat, car or even your house, insure yourself. Even for
people on modest incomes, you may need to invest an insurance lump sum of over
$1million to replace your future income if you die or are permanently disabled.
- Many people think “it” will never happen to
them. Google the statistics. Odds are “it” will before you retire. More
importantly, think about the downside for your family if “it” does and you are
- Ask yourself the ‘What if’ questions:
“What if something happens to my partner’s health
b) can’t work
for 6 months;
c) can’t work
emergency surgery, how would the family cope financially?”
Make sure your
partner does the same.
- There are four types of personal risk insurance:
life, total permanent disability, income protection and trauma cover. Each is
designed to help you address these ‘What if’ questions. Getting the balance
right requires a technical understanding of each and your personal
circumstances and risk tolerance. This is your adviser’s job.
- Like most things, with insurance you get what
you pay for. If it’s cheap, there’s a reason: it doesn’t cover as much.
- The insurance cover provided with most industry
superannuation funds is rarely adequate for a family with children and debt.
- If you have existing insurance, think carefully
before switching to a new insurer. If you have suffered health problems or
changed your lifestyle, the new insurer may not provide the same breadth of
cover as your existing one.
- Always pay your premiums on time and never
cancel a policy before a replacement has issued.