Garth Brown Michael Yardney's Commentary, Money & You July 1, 2015
The uncertainty in life is what makes insurance so important.
Although we can never predict what will happen to us, with the right insurance policies we can recover from our financial losses and especially if the unexpected happens such as death then the insurance company will share the risk with us to provide the financial security essential to keep the status quo for your family.
Australians pay an estimated staggering $85+ billion a year to buy insurance, making it one of our most expensive household budget items.
BUT IS INSURANCE REALLY NECESSARY?
Before things really go wrong in our lives, especially in the areas of health, age and roof over our head, we really need the foresight to buy an insurance policy/s that fits our lifestyle and ensure we keep it up to date … many Insurance policy holders have faced disappointment when they make a claim only to find their policy has lapsed!
You don't want that to happen to you or your family.
Most insurance is a reverse-fortune bet where the policy holder is expecting the worse and the insurance company is expecting the best.
For the privilege of betting against ourselves, we fork out billions of dollars a year.
So what do you get for the money? Here are some of the options:
1. LIFE INSURANCE
Life insurance for example, is often described as making a "bet against yourself."
You bet on a short/er life (i.e. you may die early); while the insurance company bets on a long life (i.e. you will live a long and happy life.)
Sounds a bit back to front doesn't it?
But can you afford NOT to have Life insurance?
Check out the estimated financial requirements for an average-middle income family:
Your Life Insurance needs to be enough to pay for:
All outstanding debts such as credit cards, mortgages, etc.,
The total cost of raising and educating your children*
Investments to provide a regular income for your family.
Future lump sums needed for major purchases – such as a car, and other contingencies (some you can predict, some you can't).
The cost of raising children in Australia has skyrocketed in the past five years, with middle-income families spending up to $458 a week to raise a child.
" The estimated cost of (raising) two children to the age of 21 is about $800,000," according to a NATSEM researcher.
2. TERM LIFE
This pays out a lump sum when you die.
Most superannuation funds offer life insurance, known as death cover, with premiums paid out from your super contributions.
3. INCOME PROTECTION
Also known as salary continuance, it replaces the income you lose when you cant work because of illness.
The main issues are how long you can wait until they start paying and what percentage of your salary you want to receive each month.
There are many different policies, each with its own definitions of disability and range of cover, including different waiting periods before they start to pay out.
4. TOTAL AND PERMANENT DISABILITY
This pays a lump sum if you are totally and permanently disabled.
Check if it covers 'any occupation' or your job. It is estimated almost 33 per cent of people over 45 who retire early do so due to ill health or injury (ABS).*
5. HEALTH INSURANCE
The taxpayer-funded Medicare levy helps pay for most medical treatment, but private health insurance lets you choose the hospital you attend.
An estimated 13 million Australians have some form of private health cover (PHA) *
People aged 20-30 have a one-in-six chance of being in hospital each year (estimated) – (PHA)*
6. FUNERAL INSURANCE
This is becoming increasingly popular today with the rising costs of funerals, some people choose to include in their Life Insurance while others opt for a separate Funeral Cover.
References: *Australian Bureau of Statistics;*Private Heathcare Australia
GARTH BROWN COMMENTS
Betting on a long life means being responsible by having good personal insurances to cover every possible event in your life and to ensure your family are well cared for in the event of sickness, disability or death.
We have only covered personal Insurances, of course there are many other types of Insurance policies that you need such as Motor Vehicle; Business Policies; Home & Contents Insurance; Fire & Flood Policies; and when you travel it's important to remember Travel Insurance.
We recommend you engage the services of a reputable Financial Planner to give you the right advice and guidance on all aspects of financial planning including the right insurances for you and your family.
Phone Garth Brown 1300 ASK CPC