If you speak to any financial planner, they will all agree that personal insurance is a cornerstone of financial security. What is not as widely pushed is that reviewing your insurance cover is just as important as reviewing your risk profile for your investments and superannuation. This is because, as your tolerance to volatility in the market changes over your life cycle, so do your insurance needs.
Now, as a disclaimer, I will put out there that I live in the camp of they are ALL important, and has been fully insured since the ripe old age of 21. However, not everyone is as risk conscious as myself when agreeing to cover, and not all budgets are able to stretch to cover every single base, so although I am not advocating turfing your other cover, I am saying that as a BARE minimum, you should be having a conversation with your financial planner around the following.
The glory years
You're young, and just starting out. You have finished the hard slog of education, and finally have some money to burn in your first job. Now, if you are 22, and your starting salary is $30,000, and there is an expectation that your final salary will be approximately $69,000 when you retire at the age of 65, then that is just over of income. Wow! And you thought that insuring your car was important.
The responsible years
You are no longer quite so young, and your life is changing rapidly. You have a partner, debt, and perhaps a family. We need to ensure that your family is protected, and your responsibilities met, if you are no longer around to help them, or if you are still around, but incapable of helping them.
So, here are some brain teasers for you. You know that last blood test you went for? Well, the Doctor has made that dreaded personal call and you have cancer. How is that going to impact on your family? Will your partner need to take time off work to help you while you go through treatment? What does your private health cover you for? And how do you tell the kids? After work, or while you are planning a family recovery trip to the Coast? Trauma insurance can step in and help here, after all, we all know that as we get older, things just don't work as well as they they used to, and the chance of experiencing an adverse medical condition keeps on going up.
What about if you could no longer work? You've had an accident, and you are unable to continue in your current field. Brain injuries, bad back, shaky hands, arthritis, car accident, falling out of a window, you choose the scenario, because there are plenty out there. Yes, your income protection will kick in, but what about the additional expenses such as your partner's time off work, your rehabilitation, the extra medical equipment? This is where Total and Permanent Disablement (TPD) cover is important. If you could no longer work, wouldn't it be nice to know that your home loan was paid off?
And last but not least, the big kahuna, Life cover. The importance of this one is much easier to explain, but much harder to talk about. You are dead. This is no longer about you. This is about your family. What have you done to help them recover from their loss, emotionally as well as financially?
The cheese and wine years
The children have grown up, and you have more disposable income than ever. You can take the time to sit back, and focus on just the two of you, and what your plans are going forward. Life cover is still important, and so is income protection, because your household, even in its reduced number, is dependent on two incomes to make it's dreams come true. Trauma and TPD cover may still be important, depending on your individual circumstances, but with retirement just over the horizon, and your debt on the downward trend, it may be time to rationalise the amount of cover that you hold.
*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687
This is general information only and does not consider your personal circumstances. You should not act on any recommendation without obtaining professional advice specific to your circumstances. We recommend you speak to a financial adviser before acting on any of the information you read on this website.