Protecting You and Your Loved Ones

So you’ve just taken out a mortgage. For months now you’ve been consumed with looking for that perfect house and shopping around for the most suitable home loan. Chances are the last thing on your mind is taking out risk insurance.

However, if you have a sizeable personal debt, it’s important to protect yourself and your family against the potential loss of income that services this loan.

As the major breadwinner, your injury, long-term illness or death could mean financial hardship for your family, who would be left to pay off outstanding debts without your income. If the loan you’re servicing is a mortgage, it may even lead to the loss of your family home.

For your own peace of mind, as well as for your family’s financial security, you should ensure you have adequate insurance to protect against circumstances that may reduce your earning capacity. This will mean that your financial commitments now will still be met in the event of your death, disability or serious illness.

There are three main types of risk insurance that you many want to consider if you have sizeable debts:

  • Income protection insurance: This policy is a cost-effective safety net that protects your income if you’re unable to work due to injury or illness. It offers a regular payment (up to 75 per cent of your average monthly income) to ensure you and your family can maintain your current standard of living until you return to work. Based on current tax laws, premiums for income protection insurance are generally tax deductible (excluding Accidental Lump Sum Option). This makes income protection insurance even more affordable.
  • Term life insurance: Life insurance pays a lump sum to your family in the event of your death. Although this type of insurance has no saving or investment value, it ensures that your loved ones can keep up repayments on the family home, service any other outstanding debts and maintain their existing quality of life.
  • Trauma insurance: Trauma cover offers a lump sum payment on diagnosis of around 30 critical illnesses such as heart attack, stroke, cancer or dementia. This may be an invaluable contingency plan to ensure your family’s financial security is not affected in the event of your long-term illness.

Most people believe their greatest asset is their home, car or investment portfolio. However, if you stop and think what life would be like if you were no longer able to earn a wage, your most important asset is probably your earning capacity.

If you’re prepared to insure assets like your car and home, don’t forget to protect your ability to earn an income.

If you’d like to know more about effective debt management and the importance of protecting the income that services these debts, call us on (02) 6584 2166