Risk Insurance
While most of us automatically organise insurance policies to cover our big purchases such as cars, houses and tech equipment, we often neglect to ask what is protecting the financial security and wellbeing of our most valuable assets – our family?
If something should happen to the income earning capacity for your family, whether through injury, illness or redundancy, it is important to have risk management plans in place to look after their financial future.
In general, most risk insurances can be in the form of a stepped or level premium, and it is worth assessing which works best for your needs. With stepped policies, the premium increases each year with your age, so it is important to consider the cost projections in your plans. While level premiums are more expensive, they remain constant over time with the exception of inflation and fee adjustments.
Our AusWide advisors can guide you through all the personal insurance options to map out an individualised solution that suits your affordability and risk management requirements, throughout your life stages.
In the event of sickness, injury or involuntary redundancy causing interruption to your household income, it can become difficult to service your debt liabilities and keep up with the cost of living. An income protection policy, which can be tax deductible, can help you get back on your feet and ease the stress by covering up to 75%1 of your base income. If you are self-employed or the sole income earner in your family, you really can’t afford to not have income protection insurance as part of your financial plan.
It’s important to understand the ‘waiting period’ for benefit payments, as defined in your policy, as they are most commonly paid monthly in arrears. This means that you need to add 30 days to the waiting period before you will realise a payment.
It can be a morbid topic to discuss, but life insurance does offer the ultimate peace of mind that your loved ones will maintain a level of financial security after you pass away. This insurance involves a lump sum payout to nominated beneficiaries, and while it is included in some superannuation plans, for most, the cover is not substantial enough to continue your family’s lifestyle.
Many life insurance policies contain a feature called guaranteed renewable cover, which means the policy cannot be cancelled, as long as you pay your premiums. While the premium may increase over time, generally due to age, you only have to apply once without having to provide ongoing health updates. Another feature which can be valuable, is the option to ‘buy-back’, which will reinstate your policy in the event of a total and permanent disability (TPD) claim (which would normally negate your life insurance policy).
Also known as critical illness cover, trauma insurance can help you to meet your financial obligations (if you are unable to work) and provide access to specialist treatment options, following the diagnosis of conditions such as heart disease or cancer.
If you become disabled and not able to work in any capacity, or in your usual role (some policies treat these two cases differently), your total and permanent disability insurance will provide a lump sum payout. This payment could assist with home renovations (for improved access, medical support) and everyday living expenses and liabilities.
Generally, default TPD insurance covered through your super fund is unitised which means while the premium cost remains the same throughout the policy life, as you get older the amount of cover reduces. This can come as a nasty shock, if you are left under-insured right when you need it the most.
% of income paid differs for involuntary redundancy