The end of financial year will soon be upon us. But once you get past…
95 per cent of Australians are underinsured1. While we happily insure our homes and cars, many do not realise that our ability to earn an income is our greatest asset.
Injury or illness can have a devastating impact on families, particularly if the main income earner is the one afflicted. Not only does it cause financial stress, but there is also the guilt caused by the inability to provide for the family, fear for the future, and often depression that accompanies serious illness and loss of independence. On top of this, all these factors are coming forward at a time when the focus should ideally be on recovery.
Many people incorrectly believe that they are covered for any injury or illness through workers compensation. Workers compensation is a form of insurance payment to employees if they are injured at work, or become sick due to their work.
Workers compensation includes payments to employees to cover their:
- Wages while they’re not fit for work for up to 12 weeks, reducing over time depending on the length of absence from work
- Medical expenses and rehabilitation
It is important to note that it only covers you if you are injured at work or become sick due to work. It does not cover you for unrelated illnesses or injuries such as cancer, heart attack or a back injury obtained from a car accident on your way to work. Personal insurance, such as life insurance, income protection insurance, total and permanent disability insurance and trauma, does provide protection against the impact of serious illness, including terminal illness, or injury. It will help you to continue to support you and your family financially if you are unable to work.
A client of ours was seriously injured at work in their own business. We have recently assisted with financial planning in regards to their income protection, TPD and trauma claims. The lump sum payout helped with business expenses that are not covered under workers compensation and took the financial pressure off so that our client became able to focus on returning to health. The payment also gives options to plan for other outcomes if a return to previous employment duties is not possible. If this client didn’t have the appropriate personal insurance in place, they would have been significantly worse off financially and emotionally. Recovering from illness puts immense pressure on families; balancing hospital appointments, tests and recuperation on top of the normal busyness of family life which goes on regardless of illness and injury.
There are four different types of personal insurances. We have an insurance guide to help you determine the cover that you should take depending on your financial circumstances, the type of industry you work in and if you are self-employed.
What is Life Insurance?
- Life cover pays a set amount of money when you die. The money will go to the people you nominate as beneficiaries on your policy.
What is Income Protection?
- Income protection insurance replaces the income lost through your inability to work due to injury or sickness. It is especially suitable for self-employed people, small business owners or professionals whose business relies heavily on their ability to work.
What is Total and Permanent Disability Cover?
- Provides cover if you are totally and permanently disabled. It helps cover the costs of rehabilitation, debt repayments and the future cost of living.
What is Trauma Cover?
- Provides cover if you are diagnosed with a specified illness. These policies include the major illnesses that will make a significant impact on your life, such as cancer or a stroke.
The information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser.
The views expressed in this publication are solely those of the author; they are not reflective or indicative of licensee’s position and are not to be attributed to the licensee. They cannot be reproduced in any form without the express written consent of the author.
Elliot Watson Financial Planning Pty Ltd and its advisers are Authorised Representatives of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.