Securing your Family's Future
The recent news of Hurricane Harvey sweeping through Texas, United States, has been a timely albeit devastating reminder to us here in Australia about the importance of risk mitigation and disaster management.
For many of us, providing for our family is a primary motivation that prompts us to make plans and set goals for both our personal and business lives.
However, too many of us don’t give adequate consideration to the risks that could potentially derail the attainment of those goals and objectives.
As evidence, let’s consider some facts and their potential implications:
- 83% of people in Australia have car insurance, yet only 31% have Income Protection insurance.
- 20% of all mortgage defaults are due to illness or accident.
- If you are in business with a partner the chance of one of you becoming disabled or dying before age 65 is 52%.
So, let us flesh these points out a little.
Generally speaking, the thought of losing your motor vehicle pales into insignificance when it is stacked against the potentially devastating impact of losing our capacity to generate income. Far more than just the motor vehicle is on the line if we are unable to generate regular income for six months, 12 months, two years or even the rest of our working lives.
The thought of losing one’s home is also a sobering one. Hence the second statistic is another important one that points to the fact that for every person that can’t afford the repayments on their home mortgage, one in five was not due to the fact they didn’t budget appropriately or earned insufficient income. Rather, it was due to them becoming sick or injured in an accident, and often through no fault of their own.
The final statistic is a side-step away from the importance of protecting income for an individual, to consider the likelihood that there could be a serious challenge where your business income is partly dependent on another individual.
This additional layer of complexity and risk prompts further questions such as:
- If something happened to either you or your business partner:
- Will the business still be able to function adequately or will it be forced to close?
- Will this mean a drop in your income?
- Does the business have debts secured by your home?
- Does this mean the ill-health of your business partner could force you to sell your family home?
The obvious question flowing from all of the above then becomes:
- Why would I not insure my income, or my business’ income, as a priority?
Too often, this is the missing piece of sound personal and business planning.
Many people give consideration to addressing their personal insurance needs but end up placing it in the ‘too hard basket’ after thinking:
- What cover do I need?
- What are the differences in the types of cover and policies?
- Don’t I have cover in my super?
- It’s too expensive.
- It’s too hard to get and they won’t pay out.
By discussing your goals, income, expenses and debts with a skilled financial adviser, you can tailor an insurance portfolio to your individual needs (including selecting insurance providers and policies that suit your individual requirements).
Your insurance recommendations should also be co-ordinated with wills and estate planning needs, as well as with any business structures that your accountant has implemented or is recommending. An experienced financial adviser will provide guidance and assistance to ensure that you not only have an insurance portfolio tailored for your needs but that it works seamlessly with the advice you receive from other specialists who support you.
Don’t wait until it’s too late to put appropriate insurance cover in place.