insurance

Managing life's risks

Life is a journey and one worth planning for however there are some things in life which are unplanned.
This is where managing life’s risks are important. You need to identify what risks would prevent you from achieving your life goals and then you need to decide whether these risks can be avoided, reduced, retained or offset.

Can you avoid the risks?
If you cannot avoid the risk and you have reduced the risk (by not smoking for example and living a moderate lifestyle) and the risk is to costly too be retained (large debt and/or children) then you need to offset it. This is where you may need to look at insurance.

Why Insurance
Secure you and/or your family’s future and provide peace of mind. If you or a loved one was diagnosed with a life threatening illness, suffered an accident that would prevent them from going to back to work for a lengthy period of time or even worse unexpectedly died, how would this affect your family and perhaps others financially? Obviously it is going to be a very emotionally traumatic time which doesn’t need to be exacerbated by financial ruin.

No one enjoys paying for insurance and it seems that people especially dislike paying to insure themselves even though they are their most valuable asset. Most people understand that they need to insure their car and/or their home and contents, however do they really take the time to think whether the car and/or home would be there if something were to happen to them personally?

Choice
When considering obtaining personal insurance it is important that you speak with someone who has a large range of insurers on their product list. Some insurers provide a more cost effective policy for the same type of insurance and various insurers have different underwriting requirements. Underwriting is the insurers’ assessment of the risk of providing insurance. For example, one insurer might refuse an individual cover if they have a genetic predisposition to a certain illness. By contrast, yet another insurer might decide to cover them, regardless of genetic issues. In this scenario it is essential to have choice to be able to obtain insurance.

Types
Life insurance (Term Life as it is sometimes called) is the cheapest and most basic of insurance. This provides a lump sum payment to your spouse/dependants and/or estate to pay out debts and help your loved ones continue with a similar lifestyle if you were to suffer premature death and in some cases, be diagnosed with a terminal illness with less than 12 months to live. This type of insurance evokes an unpleasant scenario, however, life insurance is designed to provide peace of mind. You can be secure in the knowledge that at a time of bereavement your loved ones won’t also have the added stress of losing their home and/or possessions due to financial difficulty.

Total and Permanent Disablement (TPD) insurance is designed to provide you with a lump sum payment to help you deal with your permanent disablement and the inability to work again either in your current occupation or one you are suited by training and/or education. Typically, you will have to be off work for over 6 months before a TPD benefit will be paid.

Trauma insurance is designed to pay a lump sum payment to help you recover from one of the defined traumatic events listed within the policy such as cancer, heart attack, stroke etc. There are generally between 30 to 40 different trauma events that are covered depending on the insurer and the policy.

Income Protection insurance is designed to replace a certain level of your personal income if you were to suffer an accident or sickness and were unable to work longer than the prescribed waiting period. A monthly payment of up to 75% and sometimes higher (depending if the insurer includes Superannuation benefits) would be paid after the prescribed waiting period and will be paid as long as you are unable to work up to the end of the benefit period. This type of policy is generally tax deductible. Some insurers will even provide Income Protection for a non-working spouse as an optional inclusion.

Superannuation and Insurance
Superannuation can also be utilised if appropriate to fund certain types of insurance (Life, Total and permanent disablement and income protection.
This can help free up personal cash flow to focus on other areas such as paying off your home loan sooner or creating wealth to help achieve financial independence. Premiums can also be cheaper under this agreement. You also need to be aware of the trade offs with including insurances in Superannuation which may be related to your personal situation so professional advice is necessary.