Friday, 1 November 2013

Friday's Five Minute Finance: She'll be right mate...

... or, maybe she won't.

I'll be up front - this post is very boring, but the detail is necessary. I said last time I would write about personal insurance next, and so I am sticking to my word, as boring as that might be. But if you can read it through to the end, it might just kick your butt prompt you to look at what risk management you and your family currently have in place. Next week I'll be back to writing about renovation finance related stuff. So please, continue reading...
Australian's are on the whole generally a pretty laid back bunch. For the most part we work hard for our money, and enjoy time off when we have the opportunity to live and enjoy life with family and friends. On the exterior we  display a "she'll be right mate" or a "no worries" attitude to the things which should give us pause to ponder, however underneath that laid back exterior a lot of people wonder about what they would do if something unexpected goes wrong; and then the issue gets dismissed or ignored until she'll be right becomes 'oh shit'.  Let's face it no-one wants to talk about morbid stuff, much like writing a will, it gets put on the back burner because it is a subject that's sad and un-nerving and people just don't want to think about the worst happening.  But unfortunately 'shit happens' (just ask Forrest Gump) and when it does the very last thing you will want to be thinking about is money.  So if you do the hard yards now and get those awful subjects talked about and out in the open, and then set a plan in motion, you will be so much better off at the time when the 'oh shit' moment arrives.

In my last post I covered off on general insurance, the requirement for which has been reinforced recently by the bush fires in New South Wales. It's times like this when you can call on your insurance companies to claim on building, contents and car insurance if your home and personal effects have been damaged or destroyed.
Broadly speaking, people seem better prepared for general insurance risks than they do for personal insurance risks, so today I want to briefly cover off on what personal insurance is and why it's important for you.  In essence it is insurance cover that provides financial security for your family and you in the event of death, serious injury or illness, or disablement. Broadly speaking the main categories you should consider are:
Life Insurance: Pays a financial lump sum benefit if the life insured dies during the term of the insurance. The idea of life insurance is to protect your dependents from a sudden loss of financial support.

Total and Permanent Disability (TPD) Insurance: This cover pays out if you become totally and permanently disabled and are unlikely to work again. It aims to provide financial assistance which will meet rehabilitation needs and associated costs, and also meet living expenses.

Trauma Insurance: This cover will provide you with a lump sum payment in the event that you suffer a specified trauma event (eg: a heart attack or cancer) and survive for 14 days (or a set period specified by the insurer).

Income Protection / Living Expenses Insurance: This cover provides a benefit that is paid after a specified waiting period, to cover up to 75% of your income, for the duration (benefit period) that you cannot work. Living expense cover is a variation of this policy designed to cover stay at home parents.

I often hear spouses say, 'Oh I don't need any insurance for my wife/partner as I am the bread winner in our household'.  I can totally see why they 'think' that that's ok.  But it simply isn't true.  Often that 'non-bread winner' is the person who is taking care of the children.  So if they suddenly die or are left incapable of caring for those children and you as the bread winner is out, errm 'winning bread' who is left to look after those children?  That would be no-one.  So do you as the bread winner stop working?  Of course not because you still need to earn money to care for your family.  However, if you have the right policies set up, you can manage this awful scenario much better and essentially buy time to sort out a plan for the way forward. 

I was told by the boss (Kate) that I couldn't turn this post into a mini insurance brochure, and to be fair that was never my aim.  But having seen first hand  how easy it is for people to get into financial difficulty in times of completely unexpected illness, and also having seen how easy it is to incorporate insurance premiums into your regular budget, if and when the unexpected does happen your finances are better set up to help you cope. So it makes sense to talk about it.

So if you haven't done so for a while, I'd highly recommend you pull out your policies and review your existing cover, and compare it to what is on offer these days. You might be surprised at what has changed.  And if you have no policies to pull out and review, get onto it sooner rather than later!

As I said at the start I'll be back next week with a piece about renovation finance related stuff...not sure what yet! Any ideas??

Till then - live well, laugh often, love much.

Go you good thing !!
P.S. Today marks the start of Movember, aimed at increasing the awareness of men's health issues. I along with the rest of my colleagues at work have joined the challenge. If you would like to support the cause and our 'wolfpack', please click on the following link. Cheers :-)

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