Estate planning is an important process with the aim of preserving and enhancing the value of your estate while avoiding adverse consequences for your intended beneficiaries should a catastrophe occur. It involves two fundamental factors: reviewing your assets, and protecting them.

This article will explore strategies to protect your assets.

contingency planning

Contingency planning is an integral element of any financial plan. After you have reviewed your existing assets, if you calculate there may be insufficient funds in the event of a catastrophe, then you should consider sourcing insurance protection.

Types of insurances which should be considered include:

There are a few main points to note for these different types of insurances.

total and permanent disablement (TPD)

This cover provides a lump sum payment in the event the insured suffers an injury or sickness resulting in total and permanent disablement.

term life

This cover provides a lump sum payment in the event of the insured’s death. The need for term life insurance generally decreases as a person reaches retirement age (they have usually cleared debt and commitments for childcare and education costs).

term life (death) and total and permanent disablement (TPD)

Proceeds of these policies are generally used to cover outstanding debt, including home mortgages and to provide funds to meet education, childcare and replacement of income.

Death and TPD cover may be paid through your superannuation provider. This allows you to use pre-taxed income to cover premiums instead of after-tax income.

It’s a good idea to determine whether or not your cover is provided within your super policies.

There could be issues relating to the access of total and permanent disablement benefits as well as benefits tax payable for policies held under superannuation.

trauma insurance

Trauma insurance provides a lump sum payment if you suffer a major health problem such as cancer, heart attack or stroke.

The purpose of this type of insurance is to assist you financially with:

income protection

Income protection policies provide income replacement after a waiting period for a specified period of time (nominated at the time the policy is implemented).

Income protection premiums are tax deductible.

Can be for a period of 1 year or up to age 65. Depending upon your profession, lifetime benefits may be available.

Can be for one week up to two years. The waiting period chosen will depend on individual sick leave entitlements or liquid assets. The shorter the waiting period the higher the premium.

This is usually limited to 75% of income and is reduced by any other ‘earned’ income i.e. worker’s compensation, employment income.

The definition of total disablement can vary. The most commonly used definition is: “Totally disabled so that the insured person is unable to perform at least one income-producing duty of their regular occupation”.

Remember, estate planning not only helps to preserve and enhance the value of your estate, but also can give you peace of mind that your loved ones will be better able to cope in less than favourable times.