Protect your Family’s Future – under 50s

April 25, 2013 by Edge Financial Planning
Protect your Family's Future - under 50s

We insure our cars, our homes and our furniture. So why do so few people protect their most important asset of all — their ability to earn an income?

Research shows most Australian families are underinsured, putting their financial security at risk. The good news is that taking out extra insurance through your super fund is both easy and affordable, allowing you to protect your financial future for less.

Many super funds automatically offer members life insurance, payable on death and Total and Permanent Disablement (TPD) insurance, payable following diagnosis of a terminal illness or catastrophic injury.
As an option, some funds also offer income protection insurance, which insures your income.

As you look ahead to retirement, you’re probably starting to squirrel away a little extra in savings, so you’ll have more to enjoy when you finally stop work. You’re at the peak of your earning potential, so now’s the time to really get serious about your superannuation.

But what would happen to your retirement plans if you were suddenly unable to work?

Losing your income — what are the risks?

While we like to think that it can’t happen to us, the statistics around serious illness and injury are sobering. For example, one in two Australian men and one in three women will be diagnosed with cancer by the age of 85, while two out of every three families are affected by cardiovascular disease. Every week, accidents claim over 100 lives and cause many more serious injuries.

While many people survive serious illnesses and injuries these days, recovering can require extensive recuperation and time off work — and the consequences can be severe.

Aside from the immediate stress of managing day-to-day expenses, an extended period off work can play havoc with your retirement savings. At a time when you may have planned to put as much extra towards your super as you can, you may find yourself drawing on the capital you’ve worked so hard to build.

You may also discover that it’s harder to find employment when you’re ready to return to work, forcing you to take an earlier-than-intended retirement. In fact, according to the Australian Bureau of Statistics, around 39% of Australians over 45 who retire early do so due to ill health and injury.

Protect your Income: laying down the benefits 

Income protection insurance is one way you can protect your lifestyle and retirement savings from a sudden loss of income. It pays a regular benefit to help replace your salary, so you can keep up with your living expenses while continuing to save for your retirement.

Depending on your policy, it may pay up to 75% of your regular income up to age 65 — although some policies offer more. Premiums are generally tax deductible, helping to make them more affordable.
Some policies may even boost the amount they pay to help ensure your super keeps growing for the time you’re out of work.

Insurance through Super

If you’re in an employer-sponsored super fund, you may be able to access affordable insurance cover as part of your super plan.

One advantage of getting insurance through your super is that it can be very cost-effective. This is because your plan may receive a bulk discount, and premiums are deducted from your account, not paid for with after-tax income, potentially giving you a tax saving.

Another advantage is that it can be simple to apply, with many plans offering pre-approved cover without a medical test.

However, with insurance through super, the default cover you’re entitled to may be limited, or have restrictive conditions in place. For example, the maximum claim amount may be less than you need, or the payout period could be shorter. And if you want to apply for more than the default, you may need to provide detailed medical records and go through the full underwriting process before your cover is approved.

To help make sure that you have the right cover for your family, you may choose to top up your employer super cover with a personal insurance plan.

Review your cover

If you already have insurance cover in place, it’s worth taking a closer look to make sure it suits your needs, and that you’re getting good value for money.

As your obligations and costs of living reduce — for example, when your children finish school or leave home, or you pay off your mortgage — you should review the amount of cover you need, remembering to keep enough cover to protect your retirement plans.

On the other hand, if you took out insurance when you were young, you should also check that your cover hasn’t been eaten away by inflation. Some policies automatically increase the benefit value in line with the Consumer Price Index each year — if yours hasn’t, considered topping it up.

Talk to your adviser

If you have any questions or concerns about the information in this article, Click here.

The Cancer Council Australia, www.cancer.org.au, February 2012
The Heart Foundation, www.heartfoundation.org.au, February 2012
Australian Bureau of Statistics (2003): Injuries and Deaths due to External Causes
Retirement and Retirement Intentions Australia, Australian Bureau of Statistics, June 2009.


Important information and disclaimer

This publication has been prepared by Leigh Stafford, Penny Collicoat, Edge FP Pty. Ltd. Authorised Representative(s) of Apogee Financial Planning Limited ABN 28 056 426 932, an Australian Financial Services Licensee (“Licensee”), Registered office at 105 –153 Miller St North Sydney NSW 2060 and a member of the National Australia Bank Limited group of companies (“NAB Group”). Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information. Information in this publication is accurate as at the date of writing (July 2015). In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of the NAB Group, nor their employees or directors give any warranty of accuracy, not accept any responsibility for errors or omissions in this document. Case studies in this publication are for illustration purposes only. The investment returns shown in any case studies in this publication are hypothetical examples only and  do not reflect the historical or future returns of any specific financial products. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. If any financial products are referred to in this publication, you should consider the relevant Product Disclosure Statement or other disclosure material before making an investment decision in relation to that financial product. Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.

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