It’s a bit of a misconception that advice is only really needed at critical life stages such as retirement or buying your first home. In today’s day age where marriage and home ownership often take a back seat to starting a family, travelling or pursuing a passion that may not be as lucrative as an office job, it is important for the other half (the renters!) to realise they need advice too. Often even more so!
Renters tend to often have much of their lifestyle assets insured, such as motor vehicles or home contents, but seldom insure themselves. Yet the worst case scenario if they are in a serious accident is not the fact that they may need to take a train or bus to work while their car is repaired, but that they may not be able to get there in the first place! Income Protection by comparison to car insurance is much more valuable, allowing you to protect up to 75% of your income for between one year and age 65 (some age 70, if you’re keen to work that long!). Plus it’s generally tax deductible!
Choosing the best policy for Income Protection is a fine art, developed over years in the industry. Depending on your occupation, health, age, gender, and financial situation there are various types of cover available which your adviser can help you navigate. Insurance advice works a little bit like mortgage advice in so far as your adviser will choose from a range of policies based on cover type, cover amount, waiting and benefit periods, and in built features and definitions, ultimately providing you with a choice of appropriate cover based on your circumstances. It may be advantageous if you are young and fit to consider purchasing level premiums, as opposed to typical policies which are “stepped” premiums as this will ensure long term affordability at claim time as well as potentially saving thousands of dollars in premiums. So best to bring up this as an option with your adviser!
Some of the reasons it may be advantageous to seek advice when young, fit and fancy free:
• Limited Health History can mean easy underwriting (insurance assessment) and cover that has no Loadings (ie additional premium charge) and no Exclusions.
• Level Premiums can be a very attractive proposition to lock in, saving thousands over the cover term but more importantly ensuring affordability at claim time.
• Longest term to retirement – the income you will lose is greatest the younger you are. This may not seem like an issue but ask your partner if they think it is!
• Critical Illness affects all ages – from paediatric cancer to adult stroke, most of us know someone closely who has suffered a major critical illness and the financial impact thereof.
• Protect your parents – not only could an injury mean moving back in with Mum and Dad, it could mean they don’t get to enjoy their retirement years! They may even want to own the policy and fund it to protect themselves!
Finally, it is worth noting that employees are at a bit of an advantage to their self employed counterparts when it comes to insurance. Many employees don’t know that they have default insurance cover via their super funds. Those that do know they have cover may not know that this cover can be increased at various life stages as their circumstances change. This can be really important for persons who would otherwise find applying for cover problematic. Such events can include the birth of a child, purchase of a home, new principle mortgage, child starting high school, pay rise or job change, etc). Whilst only a small portion of this compulsory super can be effectively used to insure them and their family, it is especially important for self employed persons to realise that they don’t have this cover. They should direct some of their earnings into insurance either inside or outside of superannuation under the advice of a good adviser. Give us a call on 1300 921 327 if you think you or someone you know could benefit from our advice!