Insurance. It’s a dirty word. Paying for something you will only use if you die, are permanently disabled, suffer a traumatic event (like a heart attack), or become ill and cannot work.

More often we meet clients that are not appropriately insured. Either completely unaware of the risks they are exposed to or are not willing to part with the premiums. Granted these are not issues we like to think about, however, what is more concerning are the repercussions of suffering one of these events and not being able to support your family because you are no longer earning an income.

Life insurance is designed to pay a lump sum to your family to repay debts and provide a further sum to assist in funding the living needs of the family, which for example could include school fees. One must consider – how would my family survive if I died tomorrow? Would they have to down size the family home? Could my wife/husband send our children to private schooling as planned?

Many people would not realize that life insurance can be owned within your superannuation fund and hence your fund pays the premiums, not you. Most superannuation funds will offer life insurance, typically as units. One unit may represent $50,000, two units - $100,000, and so on.

Total and permanent disability (TPD) insurance is equally important. A lump sum paid in the event you suffer an accident that means you are unable to carry out your occupation, or perhaps any occupation for that matter. If you are the main income provider how will your family’s ongoing living needs be met?

How would you pay for possible home modifications?

Income protection is extremely important, particularly for younger people. Although you may not have debts or a family, you still have living needs. Income protection insurance ensures that should you be unable to work due to sickness or injury, an income stream will be paid to you to a maximum level of 75% of your salary until you are 65 years of age. You can also choose the waiting period, that is, the lapsed time before the benefit kicks in. The longer the waiting period the cheaper the premiums. These premiums are also tax deductible to the individual.

Trauma insurance is also worth considering. A lump sum paid should you suffer a traumatic event, e.g; stroke, cancer or heart attack, trauma insurance is intended to fund additional medical costs and modifications to the home should they be required, such as ramps or rails. This insurance tends to be more expensive as the probability of suffering such an event is higher throughout the course of life.

It is important to be mindful that insurance is not designed to be a financial windfall. The intention is to ensure you and your family are not adversely impacted financially should such an unexpected event occur. Although a little difficult to think about whilst you are fit and healthy, you just need to consider the consequences should something occur.

Hewison & Associates
www.hewison.com.au