How healthy is your personal insurance strategy?
With a number of natural disasters this year, many of us will be checking our home, contents and car insurances to make sure we’d be covered for similar disasters.
Dramatic weather can be a stark reminder of how our loved ones and the things we work hard for can be put at risk without warning.
So it makes sense to protect those things should the unforeseeable happen.
Putting a personal insurance strategy in place can at least help take financial stress out of the equation in a disaster situation.
Protecting what’s important
Insuring your assets like your home, contents and car can provide some kind of financial relief if your property is lost or damaged.
But it’s just as important to remember that you are your biggest asset; yet this is generally the area of most under-insurance.
Unfortunately most Australian families don’t have enough life insurance. A 2009 study1 found the average payout received by families in the event of the death of a partner was just $91,000 – a worrying finding given the average family with young children has debts totaling $167,0002.
For Australian mums and dads this means if something happened, there wouldn’t be enough insurance for their own or their children’s financial needs.
And it seems women are the least prepared, with only 50% of mums holding life cover compared with 62% of fathers3.
And while no one likes to dwell on the negative, the reality is insurance could protect your family’s financial wellbeing if something happened to you.
Putting a plan in place
Setting up a robust personal insurance strategy doesn’t have to be difficult or impact your current lifestyle.
Many people don’t realise how easy and affordable it is to get covered, or what’s available to protect themselves and their family.
Your financial planner can help you identify the types of insurance that best suit your personal situation and set up smart ways to pay so you make significant savings on premiums.
The table below outlines some of the more common types of insurance that could fit into your personal insurance strategy.
|
What if? |
Which insurance may be suitable? |
What does it do? |
|
You’re temporarily unable to work due to sickness or injury |
Income protection insurance |
Covers you for a monthly benefit up to 75% of your income to replace lost earnings if you become sick or disabled and are temporarily unable to work |
|
You want to make sure your loved ones are protected if you pass away |
Life insurance |
Helps your family maintain their financial wellbeing by providing your beneficiaries with an agreed lump sum. |
|
You become ill, and need to focus on getting better, rather than worrying about your finances |
Critical illness or trauma insurance |
Takes away your financial worries, by paying you a cash lump sum if you develop certain critical illnesses so you can get back on track. |
|
You suffer a permanent disability |
Total and Permanent Disability insurance |
Offers financial security by providing you with a lump sum if you suffer total and permanent disability and are unable to work again. |
|
You’re unable to run your business |
Business expense insurance |
Reimburses you for fixed expenses incurred to keep your business going if you become disabled and cannot work. |
|
Your business partner passes away, becomes disabled or suffers a critical illness |
Life insurance, Total and Permanent Disability insurance, Critical illness or trauma insurance |
Insures you or your business partners to facilitate the smooth succession of the business from one owner to another. |
|
One of your employees dies, suffers a permanent disability, or becomes critically ill |
Life insurance Total and Permanent Disability insurance Critical illness or trauma insurance |
Helps your business offset lost revenue associated with the loss of a key person. |
1 IFSA, $91,000 not enough to cover lost life – Australians encouraged to become Lifewise, April 2009
2 For Australian families with children under the age of five, the median amount of debt is $167,000. ABS, Australian Social Trends, Household Debt, cat. no. 4102.0, 2009.
3 IFSA, Australian mothers – undervalued and underinsured, October 2005.
