Over the last couple of years but in particular the last couple of months, the relevance of life insurance has become even more prominent.
I have had close friends, clients and relatives (none of them at an age that would be considered “old”) all suffer serious illnesses with potentially devastating long-term consequences. All of which have young families at various stages of schooling or early careers, have various asset and debt levels as well as differing forms of income. Their income sources vary from being employed as wage earners, having passive investment income and being self-employed business people including relying on seasonal farming income.
The issue that comes to mind when they suffer from such an illness or injury is “what life insurance is in place?” In the majority of cases most people are not sure what cover they have!
Is it total & permanent disability (TPD) cover? If yes, is it “own occupation” or “any occupation cover”?
If yes, what is the waiting period, the benefit period, the amount of cover paid each month? Are the benefit payments indexed?
If yes, what “traumas” are covered and how are these defined?
It is usually at these times the family thinks they should have paid more attention to their insurance requirements, because Australians are significantly under insured and also reluctant to even discuss the topic!
Like many types of insurance, life insurances are seen by many as a complete waste of money. Well, we actually hope that paying these life insurance premiums are the biggest waste of money you have because that will mean you have never suffered an illness or tragedy which will result in a claim.
However, I have seen both sides of having or not having appropriate life insurances in place. I have seen clients have appropriate income protection insurance in place which have provided regular replacement cash flow to meet living expenses and continue home loan repayments when the major breadwinner could not work for a long period of time. I have seen families where the major earner has passed away prematurely but a significant life insurance payout has allowed the surviving parent to stay at home and raise their young children.
I have also seen the opposite scenario where income protection insurance or the correct TPD cover/trauma cover policy has not been in place. The stresses of a family dealing with the upheaval of a family member with a major illness or injury can be compounded due to the lack of insurance. In many cases this could have been easily avoided if more consideration had been given to the insurance needs of the family.
The bottom line is don’t think this could never happen to you. I never thought this could happen to a close friend of mine either. Talk to your loved ones about what would happen to your family financially TODAY, if you could not work due to a major illness or injury for a long period of time AND/OR you had to receive detailed & costly ongoing treatment.
Yes – life insurance can be expensive, but some of the insurance premiums may be tax deductible or paid for by your superannuation savings. This can help reduce the financial burden of having the proper policy/policies in place.
Most of us insure our house & contents, our car and/or our boat/caravan. Surely, the financial value of your future earnings (this could be millions of dollars) is also worth insuring as well as the possibility of guaranteeing your family’s financial future.
Talk to your accountant at Green Taylor Partners about life insurance – we can help point you in the right direction.
Have a safe Christmas!