One of the most unpopular topics in personal finance is risk insurance, but risk insurance helps protects you and your family in the event of death, serious injury and illness.
No one likes to dwell on the topic of injury or death but try to look at it this way; risk insurance is protection for your greatest financial asset – your ability to earn an income.
Ask someone what their greatest asset is and they may say it is their house, share portfolio or superannuation. But for most people, their greatest asset is actually the ability to generate income.
Risk insurance products include:
- Life Insurance – pays a lump sum to your estate or nominated beneficiary in the event of death.
- Income Protection – pays up to 75 % of your income if injury or illness keeps you out of work for an extended period of time.
- Total and Permanent Disability Insurance (TPD) – pays a lump sum in the event of permanent disability.
- Critical Illness Insurance (trauma) – pays a lump sum if you suffer an illness covered in the policy. The definitions vary according to the insurer, but all cover cancer, stroke, multiple sclerosis, kidney failure, organ transplant, coronary artery bypass and heart attack.
There are some people more in need of insurance than others. These people include breadwinners with kids and a mortgage, tradespeople and business owners.
Once you think about your wellbeing as a financial risk as well as a medical emergency, it becomes apparent why risk insurance is so important. If you cannot work, who will generate income to help support your family? If you die, leaving behind a mortgage and kids, how will your spouse manage the family’s debt and how will it impact on your children’s education and lifestyle?
Many people think that workers compensation or benefits will be enough to cover their costs. However, pensions are often insufficient to meet actual needs and workers compensation, being very tightly defined, is not always available as a fall back option. Anyone relying on the above should seek professional advice on the financial consequences of injury and illness.
If you are not working, you need to be able to replace the income you have become accustomed to. Ask yourself, “If it makes sense to insure my car, why wouldn’t I insure the income that bought it?”.
With so many risk insurance products available with so many options, we recommend you seek advice on the subject from a financial adviser. As with all insurances and financial products, it should be considered as part of an overall financial plan.
Contact us today to speak with an experienced financial adviser on the options available to you in the marketplace.