Most people do not want to talk about Life Insurance because they either:
- Don’t understand it
- Can’t afford it, or
- Believe nothing will happen to them
i don’t understand it
Simply put, insurance is money that is available at a time when a serious event happens to you. In the case of Life Insurance, this is when you die or suffer a serious disablement.
Life Companies have products that supply money when the above events occur. They are:
- Life Insurance to provide cash if you die to pay debts and provide income for the family.
- Total Disablement to provide lump sum cash if you become permanently disabled to pay debts, provide income for the family and pay medical costs.
- Critical Illness or Trauma cover provides lump sum cash in the event of diagnosis of certain events to be used similarly to Total Disablement. These events are disablements that may not be of a permanent disabling nature but are serious. E.g. Heart Attack, Cancer, Stroke, Paraplegia, etc.
- Income Protection typically replaces up to 75% of your income lost when you become disabled and cannot work. This provides a safety net for as long as you are disabled up to certain ages to maintain lifestyle.
i can’t afford it
Priotise the importance of your assets. For example:
- You would not consider buying a car without insuring it.
But a car does not appreciate in value and it costs considerable amounts to insure it.
- You would not consider buying your house without insuring it in case it burns down.
But for every house lost through fire, 48 are lost because the breadwinner lost his/her income.
- If you had an asset worth $1.34M would you insure it? This is the potential earning value of an income of $50,000 pa with a projected working life of 20 years (3% Inflation Rate).
The real question is if you did not have this income, would you be able to buy the car or the house?
it won’t happen to me
Each week in Australia:
- 1,000 people have Heart Attacks 1,000 people have Strokes
- 6,700 people are diagnosed with Cancer which means that 3 out of every 4 families will experience cancer.
If you use insurance, you transfer the risk to a Life Company for a premium. If you do not, the risks are the same and all you are doing is self-insuring which means that your saleable assets and savings will provide the cash you need.
At elliotts accounting, we offer a review service to assess the health of your protection plans. Please call us for an obligation free review.
This article was contributed by Allen Schasser, Joint Venture Partner. Authorised Representative of Millennium3 Financial Services Pty Ltd