"I am married with two children aged 10 and 12. My wife and I have minimum death cover included with our super, though we want to know what insurances are most important for our family and where we should go above what we have in our super."
- Question from Kain in Busselton, WA
Top answer provided by:
Leesa Swain
As a young family in Australia, building a secure future for yourself and your loved ones is paramount. While it's important to focus on creating a quality life for you & your family, it's equally crucial to ensure protective mechanisms are in place to protect your loved ones financially, if the dire were to happen.
The simplest form of insurance is a personal safety net, often a cash buffer that is set aside to assist with life’s unexpected hurdles. In life, things can go astray and it’s important to have these contingencies in place to help.
While some find a personal cash buffer sufficient to lean on in the short term to help get them through, others find having a more comprehensive financial safeguard is key to providing their family with financial security. Often with the latter, families turn to personal insurances to assist in big picture financial security.
Personal insurances can be a powerful tool to help navigate some of life’s unexpected events.
Types of Personal Insurances:
1. Life Insurance: This is a cornerstone of financial protection. It provides a lump sum payment to your beneficiaries if you pass away unexpectedly.
Picture a home loan sought on 2 incomes, and suddenly being repaid on only 1 income, because your spouse has passed away unexpectedly. Imagine not having your significant other there…let alone the change in financial circumstance for your family.
The right cover could be the difference between allowing your family to live comfortably for the rest of their days, compared to being forced into a very different financial landscape if they were dependent on you for financial means.
2. Total and Permanent Disability (TPD) Insurance: can provide financial safety if you’re unable to work due to a permanent disability. Interestingly, there are varying definitions between ‘Any’ Occupation and ‘Own’ Occupation that insurer’s use, which can significantly impact eligibility for benefits.
Now imagine you having a terrible unexpected event that leaves you totally and permanently disabled for the rest of your life. How would this impact you financially? How would it impact your family financially? Could you continue to reside in your current residence? Would it require substantial renovations to cater to your needs? Would you require additional ongoing care? How different would life be financially in this example!?
All rhetorical questions that get you thinking how an unexpected life event could have such a significant impact on your financial outlook and to consider current contingencies in place and whether these are adequate to your needs.
3. Critical Illness “Trauma” Insurance: Pays a lump sum if you're diagnosed with a serious illness covered by the policy. Most notably common diagnoses may include heart attack, cancer or stroke. The lump sum could help cover medical expenses and allow you to get back on track with relative financial ease, providing financial assistance during the recovery process.
Child Critical Illness: protection for your kids for over 20 critical illness events. This could be beneficial in providing cover for medical expenses specific to your child or provide you with lost income to take time-off to care for your child.
We all enjoy the beautiful Aussie sunshine; what if it resulted in a significant skin cancer that more serious that first anticipated? What if you needed to take some down time to accept the diagnosis or put together a rehabilitation plan that had additional cost etc. How would your financial landscape be impacted if you experienced a traumatic event and what would the additional cost be to help get you back on track?
4. Income Protection: can provide a regular income to you if you're unable to work for a period, because of a disability caused by illness or injury.
Your biggest asset is your ability to earn money and generate an income to support yourself & your family financially, achieve your goals and secure your future. If you read this and agree, your income may be worth protecting.
5. Business Insurance: Running your own business comes with its own pressures and having Business Insurance to cover expenses could help provide you with certainty if you’re unable to work. Some insurers will reimburse certain expenses while you’re totally disabled, up to your monthly benefit for up to 12 months – allowing business to continue to run smoothly in your absence or providing an easier wind-down.
Finding the Right Cover for You
As with all insurance, finding the right insurance for you and your family depends on your unique circumstances, goals & objectives and priorities. The cost versus comfort is also a consideration and it can be beneficial talking through the various options, which may include tax effective strategies or alternatives to paying premiums personally. In any case, these options should be discussed with you before taking out any cover, to ensure you are able to make an informed decision.
A qualified professional can help you determine which cover is right for you, how much cover you need for your individual and unique circumstance, as well as to help you understand the benefits, costs, different insurer offerings and fine print of various policies, ensuring you’re well prepared to protect your family’s future.
A general insurance broker is best to assist with insurances that are general in nature for example car, home, home contents, travel, marine insurance etc.
A financial adviser can assist with personal insurances such as those mentioned in this article. We can assist with an analysis of your needs (including under differing scenario’s), with the ability to incorporate your disposable assets into the calculations and capacity to incorporate future items (those not necessarily incurred but to be expected - for example private school fees in years to come) or additional items discussed in your financial plan, to ensure big-picture goals may still be within arm’s reach, even with some of life’s unexpected hiccups.
Why You Need Insurance
Life is unpredictable. If you don’t have a personal safety net, or enough of a personal buffer to help you financially when some of these unexpected events arise and you feel you would like to lean on a personal insurance to help bridge the gap, insurance can provide a safety net, ensuring your family is financially protected in the event of a crisis.
It's essential to discuss your specific needs with a financial adviser to determine the right coverage for you.
Further Considerations
- Cost of Cover: Future cost should also be a consideration with continual rising cost of living, and it is important to receive projections of premiums for cover likely to be held over time. This can assist you in determining how best to structure your insurances and whether leaning in super for help with payment of premiums is right for you.
- Quality of Cover: Some insurances, such as those within super may be provided to you by default when you join. It is important to consider the quality of the cover and understand in what circumstances you could expect to receive successful payout. It is also relevant to consider whether the insurer has a proper understanding of you and whether any policies are underwritten. Policies that are underwritten will more closely assess your present, past and likely future conditions before agreeing to insure you. This can provide the insured with a greater level of comfort in knowing what you are and are not covered for and whether there are exclusions, loadings or features included with the policy.
- Estate Planning: Consider how you want your assets to be distributed if you pass away. Insurance can play a crucial role in your estate planning strategy.
- Superannuation Death Benefit: If you have a superannuation account, it may offer a death benefit to your beneficiaries. However, this may not be sufficient to meet your family's needs. There may be implications in electing a beneficiary per tax legislation and or SIS legislation, which can provide altering definitions of a dependant.
- Review Your Coverage Regularly: Your insurance needs may change as your family grows and your circumstances evolve. It's important to review your coverage periodically to ensure it remains adequate.
At My Wealth Garden, we're committed to helping families like yours achieve financial security. Our experienced financial advisers can assess your unique situation and recommend the most suitable insurance products. Don't wait until it's too late. Schedule a consultation with today to discuss your insurance needs and protect your family's future.
Remember: The goal of insurance is not to anticipate the worst, but to provide peace of mind knowing you're prepared for whatever life may bring.
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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