Just so we're clear, I am not a conspiracy theorist
by nature, and I am definitely not an alarmist. What I am is pragmatic, and
passionate about the difference that insurance can make to a family. On the
occasions where public policy, such as the 2018 budget, ignores common sense,
and disadvantages the vulnerable in our community, I go into full rant mode,
soapbox and all. This is one of those times.
The 2018 budget has come out and said that they are
going to change the current system of default insurance cover, to an
"opt-in" system if you are under 25. This means that when your Son or
Daughter get their first job, and start having superannuation paid, you are
going to have to hound them to tick the little box, and send it back to their
superannuation company so that they have cover. Now, my daughter is only 5, but
I can't imagine that I will develop the nagging prowess needed to get her to do
anything that is remotely boring by the time she is 16. And what happens when
she turns 25? Will she automatically be awarded insurance, or only if she opens
a superannuation account with another provider? And what about the pre-existing
condition exclusion clause for that time where she went and spoke to a
Psychologist after her friend/family member/dog died and she needed someone to
talk to?
Did you know that nearly 20% of all car accident deaths
are in the 17 to 25 year old age group and that over a quarter of hospital
admissions due to land transport accidents were aged 15 - 24?
According to TAL's comparison calculator, only 10.5% of their Total and
Permanent Disablement claims for females under 35 were paid for Accidents and
Injuries. So the tragic News story that you see on Facebook is only the tip of
the iceberg. Young people die or become disabled every day, and for a variety
of reasons. What you don't necessarily hear about are the financial
ramifications, and the ripple effect of not being covered. I'm here to change
that.
The argument quoted by the Government is that those
under the age of 25 don't need cover because they don't have mortgages or
dependents. Apart from being a gross generalisation, I think that the
politician in charge of listening to whoever proposed this argument is missing
the point. A Ratecity report showed
that in 2014, 42% of Australians under the Age of 24 had personal debt of
between $10,000 to $30,000, and yet according to the Australian Bureau of
Statistics their average superannuation balance in 2017 is only
$5,011.
So, if my Daughter dies in a car accident at the
Age of 24, and hasn't opted in, who will pay for her personal debt ($30,000),
her funeral expenses ($15,000), and her legal fees ($5,000). Me (it's going to
be me, isn't it?)? Her live in boyfriend (unlikely)? The Government (and we
laugh, and laugh)? Dying isn't cheap, and someone needs to pay. Looking at
this, I will not only need to go through the heartache of losing and burying my
Daughter, but I'll also need to pony up around $45,000 that her Estate can't
cover. Sure, some of the debts will be absorbed by the creditors, but that will
just increase costs for society as a whole as loan providers factor in the
increase in bad debts.
Now, let's assume that she didn't die in the car
accident, but she sure as the sky is blue won't be working again. Ever. All of
that potential, gone. All of our hopes and dreams, shattered. Not just for her,
but any future retirement that I may have entertained as well. Rather than
being able to provide for herself with insurance funds, and having the dignity
of some independence, she will be emotionally and financially reliant on me. I
will need to support her, and myself, for the rest of my life. Rather than
receiving a regular income, and paying tax, on an income protection claim, my
Daughter will become a burden to me. Now as a Daughter myself, I would rather
die than do that to my parents. And I can guarantee you, that is what will
happen.
So, to those congratulating themselves over saving
those young ones an "extra" $500 a year, you aren't actually saving
anyone anything. What you are doing is transferring the risk. The insurance
companies can afford to charge a pittance of a premium because currently the
risk pool is so broad. They will need to increase their premiums to cope with
less people paying. So the risk is transferred to the individual who can't
afford the now increased premiums, or to the parents of the individual who will
no longer be able to afford to retire.
Find Erin* at Achieveit
Financial Planning, or call for an appointment on 07 4638 5011.
*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.
