In a survey conducted by a leading insurer, 58% of respondents indicated they would be unable to survive financially for more than three months without having to sell assets, if they couldn’t work because they were sick or injured.
In our experience working with high earning executives, it’s more likely to be six to 12 months before they need to take drastic action, but regardless, the point is to have contingencies in place that will help avoid dire situations.
It’s not pleasant to dwell on the what-ifs, but it’s these difficult discussions that executives and business owners who work long hours and shoulder huge stress, need to have so they may financially protect themselves.
When it comes to insurance, most people regard insuring their home and motor vehicle as a sensible step for protecting valuable assets. However, it often takes a whole lot more convincing to get people to take insurance cover for themselves.
A telling fact is that around 95% of families have insufficient levels of personal insurance, despite one in three Australians being affected by an accident or illness for more than three months during their working lives.[1]
A common misconception around insurance is that it’s too expensive.
The fact is, no reputable financial adviser would recommend a personal risk strategy that was unaffordable.
The key is to be properly advised, consider recommendations carefully and only invest in insurance policies that are tailored specifically to individual needs.
While affordability is fundamental, decision making should be based on value, the policy benefits and the financial entitlement provided at claim time in context of the premium to be paid.
Which brings me to definitions and the claims process.
We’ve all heard war stories about people being knocked back on their insurance claim and the personal stress and financial disadvantages it can bring.
In my experience which spans more than 20 years as a financial adviser, reputable insurance companies pay their claims according to the entitlement outlined in the policy. And just as importantly, reputable advisers carefully explain policy clauses and definitions so expectations and financial entitlements are clear.
There is a lot involved, and regular reviews and progress meetings are important, as it’s common for clients to not remember or not realise their entitlements.
As a case in point, not so long ago I met with a client for our regular six-month financial planning progress meeting. During our catch up, I commented that the client’s wife hadn’t attended as she normally would. It was then I discovered she was having treatment for cancer. Through the stress of the diagnosis and treatment, this couple had forgotten, or hadn’t realised their trauma cover insurance would provide financial entitlements when claimed, that would help them manage their medical and recovery bills.
When it comes to claims, those with ‘advised insurance’ can rest assured their financial adviser will facilitate the entire process for them.
The adviser will liaise with the insurance company, collate all the documentation which includes collecting medical reports or death certificates, completing and submitting the claim, following up and negotiating any technical points. During times of duress, the claim coordination and advocacy on your behalf should never be unvalued.
As financial advisers we are accustomed to having frank discussions around the need for, and the cost of personal insurance, and believe me, for those who need to make a claim, the sheer relief that comes with knowing they are financially okay, is palpable.
There’s no denying, personal risk insurance can be complex and most people need qualified advice to achieve what’s right for their circumstances.
Next steps
If you do not have a personal protection strategy, may I suggest you calculate how long you could live on your savings if you were unable to earn income. Ask yourself if your current level of savings will cover your treatment, debt commitment and lifestyle expenses while you recover.
If you do have personal insurance policies in place, check when they were last reviewed. If it’s longer than 12 months, action is needed.
Important changes, such as getting married or divorced, having a child, having acquired more debt or changed your employment or income, will affect your financial requirements and the entitlement you will need to be paid in the event of a claim. As indicated above, it’s so very important to mention any health events or injuries that may warrant making a claim.
May I also suggest you take a moment to click the link below to read this true story and how our ‘advised’ personal insurance strategy, provided the financial security needed for these clients in the most difficult of circumstances.
As a last word, consider this insurance rule of thumb… You should only insure what you can’t afford to lose.
And let’s face it, there’s no replacing your health and life.
For more information, please contact Executive Strategies on +61 7 3007 2080 or email contact@executivestrategies.com.au
Executive Strategies is a specialised information hub for executives and senior managers who may have founded their own business or who work for growing private, ASX listed companies or government businesses. Its purpose is to provide access to specialist advisers and information that addresses the often-complex issues affecting their personal prosperity.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decision.
Please note: Tax advice and other services not offered under the Fortnum Private Wealth AFSL are referred to appropriately qualified professionals.
Case Study: Where there’s advice there’s a way.
[1] Zurich Misinsurance Whitepaper February 2014 https://www.zurich.com.au/content/dam/australia/advisers/Australians-and-life-insurance_Misinformed-Misinsured-booklet.pdf
