Top tips for your financial back-up plan
It’s natural to procrastinate over a daunting task, but the bottom line for any financial plan is how well it provides for the protection of you and your family if the worst happens. These tips will help you identify the key elements your plan should include to get the right cover at the right price.
How much is enough life insurance?
When it comes to insuring your life, working out how much cover you should have may seem like a very subjective question, but there are certainly some guidelines to follow.
If, for example, one of the family breadwinners was suddenly taken out of the picture, how much would the family need to invest to replace their income and how much capital would you need from an insurance payout to fund that investment?
You may also want to have additional cover amounts to pay out a mortgage, cover specific emergencies or situations, or fund special purposes, such as a children’s education fund.
Are you insuring your greatest asset?
Do a quick mental calculation of your annual income multiplied by the number of working years you have left before retirement. The answer is the amount you potentially risk if you don’t have income protection to cover you against sickness and accident.
You can generally insure up to 75 per cent of your gross income and you can tailor cover with a “waiting period” that ties in with your sick leave entitlements, to keep premiums to a minimum.
How do you “bridge the gap” between life cover and income protection?
If you really want to protect your lifestyle against the threat of major diseases such as a heart attack, stroke, or cancer, then you should consider trauma cover. You can insure yourself for a lump sum that is payable upon diagnosis of a range of medical conditions. You can then use this cover to fund a lifestyle change, an extended recuperation holiday, pay off debts to de-stress your life — the choice is yours.
Are you protected if you become disabled?
If you’re injured and become disabled, you could completely and permanently lose your ability to earn income. But, on top of that you may incur even greater expense burdens related to your condition, such as home renovations for wheelchair access, special vehicles, and expensive medical treatments. To protect against this financial threat, you can attach lump sum total and permanent disablement cover on your life insurance plan.
Will the cover in your super fund be enough?
Relying on your super alone to take care of your insurance needs can be a shaky strategy. Will it be enough cover to give you the level of protection you need? Will you be able to continue coverage if you leave your employer? If not, will you still be insurable if you want to take out cover privately?
Don’t compromise on quality
Not all insurance plans are the same — especially when it comes to income protection and trauma insurances. Benefit definitions and supplementary benefit inclusions can make thousands of dollars of difference when it comes to claim time, so consult a financial planner to ensure you have quality cover at the right price. When it comes to personal insurance, value is far more important than cost.
Are you paying too much?
Using a financial planner to help with your protection program gives you the benefit of their inside knowledge on a range of insurers. They can save you the hassle of comparing plans so you can achieve the most economical solution.
Take the next step
To discuss your financial situation, make an appointment with a Bridges financial planner.
We have an established alliance with Bridges, to provide our customers with financial advice. Bridges has been helping Australians with financial advice for 30 years.
A Bridges financial planner will develop a plan specifically for you; one that’s tailored to your needs and circumstances to help you achieve your goals.
To make an appointment with a Bridges financial planner, call 07 5499 8988>. The initial consultation is complimentary and obligation free.
Bridges Financial Services Pty Ltd (Bridges). ABN 60 003 474 977. ASX Participant. AFSL 240837.
This is general advice only and has been prepared without taking into account your particular objectives, financial situation and needs. Before making an investment decision based on this information, you should assess your own circumstances or consult a financial planner or a registered tax agent.
Examples are illustrative only and are subject to the assumptions and qualifications disclosed.
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