"Picking up the Pieces": a new perspective on life insurance

ING Australia recently launched research, “Picking up the Pieces” that looks at the impact of parental death on the remaining spouse and children and how being prepared for the worse can ultimately effect their future well being. The report highlights that while Australian parents can never fully prepare for the death of a loved one, they can take positive actions to ensure the best possible social, educational, psychological and financial outcomes for their children.

Key findings from the report include:

  • Almost two-thirds (63%) of respondents had less than a week’s notice of their spouse or parent dying and almost half (43%) found out about the death post the event;
  • 64% of deaths were the family’s main or equal financial provider;
  • Close to one in four children had to move schools within two years of the death due to financial pressure;
  • Almost one third (32%) of families moved house as a result of financial pressure; and
  • More than half (56%) went on fewer family outings.
  • Alarmingly, not only does an unexpected death in a family often result in a change of family circumstances due to financial pressures, the changes themselves can often have harmful effects on children. For those children who had to change schools or move house, clinical depression and a drop in academic performance was prevalent.

The report also uncovered a difference of opinion when it comes to the changes in a child’s life after the death of a parent. Whereas 35% of children felt they took on more responsibility for paying bills following the death of a parent, only 6% of parents felt that this was the case.

[1] The Lifewise/Natsem Underinsurance Report

83% of Australians insure their cars but only 31% insure their incomes – Protect your income with Income Protection Insurance

This is where life insurance can help out. Most people understand it to mean term life insurance (payable on death); but income protection is another type of life insurance available that pays a replacement salary if you are unable to work, due to sickness or injury. This means that if you suffered a heart attack or stroke, got cancer or had a serious car accident, an income protection policy will generally pay up to 75 per cent of your pre-injury or illness salary.

Still not convinced that income protection is for you? If you are single and have a mortgage or debt, ask yourself for how long would you be able to meet your financial obligations including your mortgage/ loan repayments if you became ill, injured or unable to work? And if you are a parent, for how long would you be able to pay the mortgage on your family home, your children’s school fees and/or living expenses such as running a car if you couldn’t work?

Remember that income protection premiums are tax deductible.

[1] AAMI fact sheet, Shopping for Car Insurance, September 2008
[2] ING Australia’s Attitude Towards Life insurance, December 2008

New Financial Year, New look at your life insurance

There are numerous types of life insurance available to you including:

  • Life insurance pays a lump sum on death.
  • TOTAL Permanent Disablement (TPD) insurance pays a lump sum as a result of disablement which ends up with the insured being unable to ever return to work.
  • Income protection insurance pays up to 75% of your pre-illness or injury salary if you become seriously ill or injured and are unable to work. Premiums are tax deductible. Increasingly this is offered as an option in superannuation but is not automatic. Policy wordings and benefit waiting periods vary so professional advice can help.
  • Trauma insurance pays a lump sum on diagnosis of a specific medical event. This can help with medical expenses, a home modification or a holiday following a medical event. It is not offered as part of superannuation.

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