Most people would have read about the skiing accident that former formula one driver Michael Schumacher suffered about a month ago. He is still in a coma and his future health is very uncertain. Apparently, Michael took care of his health and was very fit. However, of course, accidents can happen to anyone and we are all subject to similar risks.
Most people will financially survive short term incapacity without many (any) long term effects (i.e. 3, 6 or 12 months off work. You might have annual leave, sick leave, savings, family assistance, etc. to get you through). However, the most severe financial risk for most people is long term incapacity. Long term incapacity would financially devastate most people – especially people with dependants (if they didn’t have insurance). The key question is: what would the financial impact be if you couldn’t work for the next 5 to 10 years or worse still, ever? How would it impact your lifestyle, dependents, retirement strategy and so on? You need to ask yourself this question because accidents can happen.
For most people this risk is just too severe to not mitigate (insure against). Therefore, this blog serves as a friendly reminder to check your income protection insurance cover. Some things to consider:
- It’s rarely an all or nothing decision (i.e. full comprehensive cover or no cover at all). It’s more of a decision about how much cover is appropriate for you. There are smart ways of balancing the cost and amount of cover – you don’t necessarily have to insure all your income
- Income protection insurance premiums are tax deductible
- Income protection insurance inside super typically doesn’t protect you against long term incapacity (as the benefit period is often only 2 years plus there are other issues – click here for more)
- Some people are sceptical about insurance and claims statistics. But for most of us it’s a necessary evil. Would you consider not insuring your car or home? Your ability to earn an income is arguably your most valuable asset.
- I believe an insurance advisor’s role is not to sell as much insurance as possible but more correctly take a client though a process to decide how much insurance is appropriate for their situation after considering all the risks. If a client decides they don’t need any insurance then so be it.
If you would like assistance in assessing your current cover and if it’s appropriate, reply to this email. We are here to help you – definitely not to sell you anything you don’t want or need.