No two lives will ever be lived the same way, but the one universal truth that applies to all of us is that life can be fragile and unpredictable. This has a profound effect on our financial planning, as we move through life’s different phases.
The most efficient way to cope with life’s challenges is with sound risk protection planning. To illustrate, let’s meet Richard and take a look at how a life well lived is worth protecting.
Maintaining youthful independence
Richard entered adult life with a dream to become an architect. After finishing university, his first full time job was at age 22 in a large architectural firm. It wasn’t long before he bought his first car and the inevitable credit card came along too.
Richard was always into fitness, but he was also smart enough to know that this would not guarantee against every sickness or accident. With his new financial responsibilities to take care of, he took out Income Protection Cover to ensure he was able to remain financially independent.
Putting down roots
Richard’s job was going well and at 26 he had saved up enough for a home deposit. He took on a mortgage for an apartment and stretched the credit card for some new furnishings. He had also become engaged to an old university colleague.
He increased his Income Protection Cover to reflect his raised income and with an eye to the future, he decided that Life Cover would be a good idea now. Especially now that he had a mortgage, a current clean bill of health and his insurability was good.
The patter of little feet
Richard and his fiance, Amy, were married two years later and a significant promotion at work enabled them to take on a larger mortgage and buy a house. Before long, there was a child on the way and another followed shortly after.
Now that he had a family to provide for he decided to substantially increase his Life Cover and include Total and Permanent Disability (TPD) Cover to provide lump sum benefit for the worst case scenario. This would be enough to pay out the mortgage and provide an ongoing income for Amy to raise their children without having to work. Richard also took out Trauma Cover to give himself lifestyle options if a major illness, such as a heart attack or cancer, were to occur.
Amy had decided to be a full time mum and also took out Life Cover and TPD Cover for an amount that could pay out the mortgage and provide sufficient funds to allow Richard to employ home help, if something happened to her and Richard was left by himself.
The middle years
The years went by quickly and before they knew it, the kids were at school and Richard was head hunted to a new firm with a major salary increase. Along with the lifestyle improvements came more home renovations, a bigger car and more debt.
Richard and Amy kept a close eye on their insurances with the help of their financial adviser. They increased their Life and TPD Cover to insure the larger debt and to ensure there would be an education fund for their kids in addition to the ongoing income it would provide. Richard also increased his Trauma Cover to fund a full year off work, if he were ever to experience a major illness.
The kids finally left school and Richard and Amy decided to downsize on their home to something more manageable. There was still a small mortgage to cover and an income to protect, but they were able to gradually scale back their Life and TPD Cover.
Once at retirement and with the mortgage paid off they were able to reduce Life Cover to just cover funeral and final expenses. Since Richard had retired he also ceased his Income Protection Cover.
Why ride your luck?
Richard and Amy had gone through life with the blessing of good health, but they knew that without the foundation of sound risk protection plans everything they had built up could have come crashing down in an instant if either of them had suffered a major, injury or premature death. Life is unpredictable, but financial security can be made more certain with good advice and the right insurance strategy.
* Richard’s story is for illustrative purposes only.
If you have any concerns about gaps in your protection plans, talk to us today by calling (02) 9299 4520 or email to [email protected].