The common belief “it won’t happen to me” often results in many people having a sound plan for wealth creation, but not an adequate plan to protect the very thing that generates wealth – themselves!
How death, disability or illness affects your ability (or your family’s ability) to realise your lifestyle goals and objectives will depend on the wealth protection strategy you have in place.
By taking out insurance and having a comprehensive estate plan, you can provide some financial protection for your family’s personal needs. Insurance can be structured to provide for such things as the repayment of your debts upon death or disability, financial assistance for dependants, and protection against the loss of income.
McCarthy Financial can assist you by performing a comprehensive risk needs analysis and providing advice on the following:
Life insurance
Life insurance can be critical for a secure financial future. In simple terms, you insure yourself for a particular amount, and in the unfortunate event you die, the insurer pays that amount.
The lump sum payment can be used to help with the repayment of debts, the covering of future needs (for example, the cost of children’s education or long-term care), and providing funds for investment to generate an income, or to keep your business afloat. Life insurance may be obtained via a superannuation fund.
Total and permanent disability insurance
Total and Permanent Disability (TPD) insurance will provide a lump sum payment should you suffer an illness or injury that totally and permanently prevents you from working again.
There are broadly two main definitions of Total and Permanent Disability:
- Own occupation – The insured must show they have a total and permanent disability that prevents them from working in their own occupation, which they disclosed when applying for this cover.
- Any occupation – The insured must show they are totally and permanently disabled and unable to work in their usual, or any other occupation for which they are reasonably suited by their education, training or experience.
Critical illness insurance
Critical illness insurance (also known as trauma insurance) provides a lump sum benefit in the event the life insured suffers a “critical condition” as defined by the insurance provider. Critical illness cover is designed to help you financially recover from a trauma or crisis, such as a heart attack, stroke, cancer or other life-threatening conditions.
Income protection insurance
Income protection insurance (also known as salary continuance) is designed to provide a regular income in the event you are unable to work due to sickness or injury. Generally, income protection insurance provides a regular income during a period of disablement for up to a pre-determined and agreed benefit period. The benefit amount payable is up to 75% of your income.
Business expenses insurance
A complement to income protection insurance is business expenses insurance.
This type of cover ensures the portion of your business expenses for which you are responsible will be able to be met should you be temporarily unable to work due to injury or illness.
Business expenses insurance generally reimburses you for certain regular business expenses, such as rent, utilities, lease costs, and depreciation. It is important to note not all expenses will be covered. This can help to cover your fixed business costs and keep your business afloat while you are recuperating.
Generally, this type of insurance can cover up to 100% of eligible expenses up to the chosen benefit amount. The maximum benefit payment is for one year’s expenses. The reason is if you are disabled for longer than one year the business would be disposed of, or restructured in some way.
Estate planning
An effective estate plan includes tax effective Wills to protect your estate and the interests of your beneficiaries in the event of your death.
Jointly held assets, trust assets and superannuation, however, are not necessarily dealt with by the terms of the Will. These are usually considered ‘non-estate’ assets for estate planning purposes. However there may be specific State legislation that classifies non-estate asset as ‘notional estate’ for the purposes of a Family Law challenge.
It is therefore important to have a considered and comprehensive estate plan to ensure all assets are transferred according to your wishes in the most effective and efficient manner.