Wednesday, May 16, 2018

Do you have children under 25? Then you need to read this....


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.

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