Your income is the foundation upon which your family’s financial plans are built and in most people’s lives there won’t be a larger asset to protect than their cumulative income. Consider this – a 40-year-old man currently earning $75,000 per annum with salary increases of 5% each consecutive year will earn over three and a half million dollars by the time he turns 65. When it’s put that way, your income is
certainly worth insuring!
Life has a habit of throwing up hurdles, usually at the most inconvenient times. It’s impossible to know what’s going to happen in your life but insuring against potential problems reduces the risk that you may not achieve your goals.
Basically, to achieve your life plans you need to maintain your cash flow, so what happens if it should suddenly stop? Income protection insurance can replace up to 75% of your income if you can’t work due to accident or sickness and the premiums are tax-deductible.
It isn’t a replacement for workers’ compensation, sick leave or private health insurance. It is a long-term solution that should be tailored to work in concert with these and other insurance types.
Could this be you?
Matt was a 40-year-old carpenter who fractured his leg in three places when he fell off a trampoline playing with his son. His financial circumstances were:
1. Rent $1800 per month;
2. Child maintenance payments of $750 per month;
3. School fees $500 per month (paid annually and due shortly);
4. General living expenses (food, electricity, petrol, etc) $1200 per month; and
5. Car repayments $420 per month.
Due to the severity of the break, Matt was off work for ten months. The accident cost him more than $50,000 in lost income and all of his savings. He borrowed from his ageing father to cover shortfalls such as school fees and rent. After his recovery, Matt found it difficult to work as a carpenter because his injury affected his ability to climb ladders and maintain adequate balance.
If Matt had income protection insurance with the appropriate conditions and terms, he would have been able to recuperate without the stress of huge financial pressures. Additionally, he may have received ongoing partial income while he retrained for another career.
Consider your own circumstances in the event of misfortune and ask yourself honestly – how would my situation unfold? Then discuss your current protection and possible strategies with a licensed financial
adviser.
Assumption of calculation: taking into account gross base salary only; not including tax, super contributions or bonuses.
General Advice Disclaimer
This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or WealthSure Financial Services Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.