We all hope that bad things won’t happen to us, but what if they did? These people held the same belief until…
Jordan started his own business servicing computers after working for a major IT company for many years. At age 38, he was enjoying the freedom and control it gave him. Unfortunately his car collided with a truck on the way to see a client and Jordan suffered a severe whiplash injury. He couldn’t work for two months and the loss of income made life hard for his young family.
He didn’t think to arrange income protection insurance to replace the workers’ compensation cover he’d had with his former employer.
By their late 40s, James and Jenny had worked hard to reduce their mortgage and used some of the equity in their home for a loan to buy an investment unit. It was tenanted and had the potential for long-term capital growth. Sadly, James died suddenly after a massive stroke. On a reduced income Jenny couldn’t afford to keep paying the interest on the investment loan. The unit had to be sold quickly at a loss.
They didn’t think to increase James’s life insurance when they borrowed for the unit.
At 42, Sara is a successful business owner and prides herself in managing her personal finances well. She has a diversified portfolio of property and shares. Last year she contracted breast cancer and her work was disrupted with tests and hospital treatment for five months. She has now recovered but the medical bills made a severe dent in her finances so she was forced to sell a big chunk of her share portfolio at short notice.
Sara didn’t know that trauma insurance may have paid her a lump sum if she was diagnosed with a critical illness.
Three important lessons can be learned from these cases.
Firstly, the unexpected can happen to anyone.
Secondly, take the time to review your insurance arrangements at least once every year. If there are changes in your circumstances – new job, new loans, family changes, etc. – you may need to make adjustments to your cover.
Thirdly, talk to an expert. There are many different choices of insurance and it pays to have a specialist analyse your needs and find the most cost-effective solution for your circumstances.
Review your insurance policies
The last few years have seen reduced profits for insurance companies due to lower investment returns and rising claims. This has caused premiums on most types of policies to dramatically increase.
Each time you review your insurance, check your coverage and make sure you have told the insurer all of the information they need to know. The last thing you need when making a claim is to discover that you’re not covered or you didn’t fully disclose the facts.
Checklist
- Does your income protection policy still reflect the income you are currently earning?
- Will your life insurance pay off all your current debts and be able to support your dependants if you can’t work?
- Have you taken up a “high risk activity” such as skydiving which could affect your life cover?
- Will your house insurance pay out enough to rebuild your house if it is destroyed?
- Have you recently installed security devices on your home that could reduce your premium?
- Have you bought an expensive work of art and forgotten to add it to your contents policy?
- Has your vehicle been modified in any way that could affect your motor vehicle policy?
This list is by no means complete but it’s enough to start you thinking. If it’s time to arrange a review for a complete analysis of your insurance needs contact your licensed adviser.
For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.
Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
