Your call is booked in – I am looking forward to speaking with you. Below is some further reading on why the right insurance protection for your family is so crucial.
Introduction
Why be properly insured? Well, the simplest reason: you have children and responsibilities.
According to the Financial Services Council,
“Life insurance companies pay out almost $33 million to 279 Australians and their families every single day, 365 days a year. Payments are made to people who have lost a partner, a parent or a loved one, or to help people support themselves and their family when they are too ill to work, after a critical illness or who are not expected to be able to work ever again.”
If you have a family – a wife/husband and children there are no two ways about it; you need to consider what types and amounts of insurance are appropriate for your situation.
The most common mistake is not being appropriately insured and then potentially only realising this when it’s too late.
For almost all of us, our whole family life is built upon our regular income. Almost everything we do, where we live, our lifestyle, what we provide the kids; all rests upon the idea that each week/fortnight a reliable income will come in and pay for it all.
Imagine for a moment if either of you could suddenly not do your normal work/household tasks. What would happen to the functioning of the family? How much and in what ways would life be disrupted and thrown off track?
The 5 big risks
When it comes to personal insurance, there are 5 big risks that ought to be considered and how one might try to protect their family from the financial impact should one of these big risks eventuate
1. You die prematurely
No one likes to think and plan for their own untimely death yet it is far better for you to do it now rather than leaving it to your grief stricken, dependant on you family; to try to pick up the pieces AFTER you have died.
Now to be fair, most people die as old people. However, not all. In 2018, 4,686 people died in their 40s & 10,000 died in their 50s according to the Australian Institute of Health and Welfare. That’s 15,000 families who experienced one hell of a shock during their day throughout 2018.
Having your family grieve for you at your funeral is one thing, having your partner then also stressing over how to keep the family financially afloat in your absence is something that could, and should be avoided by putting appropriate insurance in place.
2. You don’t die, but something happens causing you to never be able to work again
Granted, a better outcome than dying in your 40s or 50s. However, still a terrible position to ever find yourself in.
You are alive but you are unable to work again because you have been injured to such an extent that you cannot ever work again; either in your current job/role or a job that you are reasonably trained, skilled and experienced in.
This type of event, a person not being able to ever work again, happens more frequently than people realise. In 2018, per ASIC report 633, 26,150 claims for TPD insurance were lodged. Or put another way, 541 people each week on average, woke up not knowing it would be the last week they would ever work again.
Not being able to work ever again would be a jolt enough. Left worrying about how you will keep a roof over the family’s head when you physically cannot work is a feeling no one should have to ever experience.
3. You don’t die, you can eventually work again but suffer a major illness or trauma
Hundreds of thousands of Australians each and every year experience a major illness or trauma. 150,000 Australians are estimated to be diagnosed with cancer in 2020, according to the Cancer Council. The Stroke Foundation estimates 56,000 Australians will suffer a stroke this year. The Heart Foundation data states on average 1,100 PER DAY are hospitalised with heart disease.
Thankfully, with medicine and treatments improving as well as the positive benefits of lifestyle changes, less people are dying immediately from such traumas and illness. However, the short-to-medium term impact, health-wise, emotionally and financially can be substantial.
Suffering a major trauma or illness like this could have a substantial impact on your ability to work; or your partner’s ability to keep working particularly if they need to take time off to care for you or do more for the children. Needing to take a few months off work to recover from a heart attack, cancer or stroke could have a huge impact on your household budget.
4. You cannot work for an extended period of time because of sickness or injury (including mental health)
Ensuring your income continues to flow is perhaps the single most critical feature of both maintaining your lifestyle, your mortgage payment as well as preparing for retirement. You whole life is hinged on you receiving your regular income.
If your pay cheque stopped, how long could you continue to meet your current lifestyle needs before the credit card was maxed out?
More than 38,000 claims for Income Protection benefits were lodged in 2019. Think about that for a moment, 730 people per week needed to call on their Income Protection insurance to help keep their finances afloat.
5. One of your children suffers a trauma or major illness
As a parent, I have 3 young children and there is nothing that can provide you with greater joy, happiness as well as stress and worry.
Nothing will stop you in your tracks faster or with more impact than a sick child, or worse; it is the single greatest fear we have as parents.
No parent ever wants to think something terrible could happen to their child, but the unfortunate reality is bad things do happen – everyday.
As a parent if your child experienced a major trauma or illness, your mental capacity to be focused on working would be strained to say the least. Having your child in hospital for a major illness would be bad enough. Agonising over splitting your time between having to work and being there for your child would be a cruel twist of salt in an already sore wound.
Protecting your family financially against these risks
There is little that can be done to neutralise the negative and emotional impact suffering any of these events would have on you and your family.
However, we ought to at least do what we can to minimise the financial impact were we to suffer an insurable event.
It would be terrible to be lying in a hospital bed having just suffered a heart attack. The very moment doctors are telling you to reduce your stress levels you are the most stressed you have ever been.
Financially speaking, with the appropriate insurance in place, you could put aside the worry of needing to get back to work or how you will keep the mortgage payment going or the kids in school and their activities.
The right type and amount of insurance is about that one thing; providing peace of mind.
If the worst events happen, at least financially you will be ok. At least financially you won’t have to worry about work, the bills or how you will keep affording the lifestyle the family is used to.
The price of an insurance premium is always, always less than the price of regret.
Sources:
- Financial Services Council – “Life Insurance Awareness Week: Data Day – Detailed Data Reveals Top Causes of Claim for the Industry.” 29 July 2020 https://www.fsc.org.au/resources/2048-fsc-media-release-detailed-data-reveals-top-causes-of-claim-for-the-industry/file
- Australian Government (Australian Institute of Health and Welfare) – ‘Deaths in Australia’ 7 August 2020. https://www.aihw.gov.au/reports/life-expectancy-death/deaths-in-australia/data
- Australian Securities and Investment Commission – ‘Report 633: Holes in the safety net: A review of TPD insurance claims’. October 2019, https://download.asic.gov.au/media/5311117/rep633-published-17-october-2019.pdf
- Cancer Council – ‘Facts and Figures: Cancer Statistics in Australia’ https://www.cancer.org.au/cancer-information/what-is-cancer/facts-and-figures
- Stroke Foundation – ‘Facts and Figures.’ https://strokefoundation.org.au/About-Stroke/Facts-and-figures-about-stroke
- Heart Foundation – ‘Key Statistics: Heart Disease in Australia’ https://www.heartfoundation.org.au/About-us/Australia-Heart-Disease-Statistics
- Australian Prudential Regulation Authority – ‘Statistics: Life Insurance Claims and Disputes Statistics’ 26 October 2020. https://www.apra.gov.au/sites/default/files/2020-10/Life%20Insurance%20Claims%20and%20Disputes%20Statistics%20-%20June%202020_0.pdf
General Advice Warning
This post, the research, ideas, theories and conclusions presented in it are for general advice and / or informational purposes only. Your personal circumstances, situation or objectives have not been taken into account when preparing it.
No person should make a decision regarding their investments, superannuation or insurances polices based on this information alone. You should before making any decision with respect to your investments, superannuation or insurance policies consult with a financial adviser to determine if the decision is an appropriate one for you, your objectives, personal situation and needs.
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