Resilient: protecting your financial fitness

In fitness, we know there are certain things we can do to avoid injury, like warming up, taking safety precautions, etc. But accidents can happen. Just as an unexpected illness or injury can throw a spanner in our workout plans, it can also jeopardise our financial fitness. In this instalment of ‘Fierce Females’ we explore the role of insurance in helping protect your financial future.

When you think of insurance, you’re most likely to think of ‘general’ insurance, which includes home & contents insurance, car insurance and travel insurance. Depending on your personal circumstances, you may also be aware of life insurance, which is a type of personal insurance.

What you may not have given much thought to, however, are the types of insurance that can make all the difference to your long-term financial fitness, including income protection insurance and total and permanent disability cover.

While life insurance and total permanent disability cover pay out a lump sum amount, income protection insurance is designed to cover your salary should you be unable to work for a period of time.

NGS Financial Planner Trudy Jenkins¹ says insurance is all about assessing the impact of life’s unknowns on your quality of life. We can plan to the best of our abilities, but unfortunately illnesses like cancer or trauma from a car accident can strike when we least expect it.

“When we think and talk about insurance, it’s always about assessing what if something were to happen to you? How would you cope if you became ill and were unable to work? How would your family cope if you were not around? It’s all about asking those basic questions as your life circumstances change.”

She believes that income protection insurance is one of the most important forms of insurance that young professionals should consider, especially those with significant recurring expenses like a mortgage or car repayments.

Life stage and level of cover

Insurance cover is about your own personal circumstances, and your insurance needs will change over time. To protect your financial freedom it is vital to constantly reassess your need for cover, especially as you reach key personal and financial milestones.

“It’s important to constantly review your cover and it’s not always about whether you have enough cover. You might find that you have too much cover and are paying fees for cover that you’re potentially not going to benefit from,” Trudy says.

“On the flip side, you need to remember that once you cancel cover you may not be able to reinstate it straight away. There are likely to be medical questionnaires and a process before cover can be reinstated.”

Key triggers for assessing your insurance cover:

• Getting married or entering a de facto relationship
• Having children
• Taking out a mortgage

Insure inside or outside super?

You can hold insurance inside or outside of your super. The first thing to check is whether you have insurance within your super – if so, make sure that you know what your insurance covers and what premium you are paying. An advantage of having insurance within your super is that you probably don’t even notice that you’re making the payments. But that’s not much help if the cover isn’t what you need, or the premium is high (and is eating away at your super).

Recent legislative changes mean that if you have less than $6000 in your fund, you won’t automatically have insurance cover in your super after 31 March 2020 unless you ‘opt in’ (agree in writing to the insurance cover). New members under 25 who join a super fund on or after 1 April 2020 will also need to opt in to insurance if they want their cover to start right away. Otherwise, it will apply only after they turn 25 and have more than $6000 in their super account.

If you choose to have insurance outside of super, make sure you’re not doubling up and take the time to explore your options.

Stay informed

Before making any decisions about your insurance cover you need to know all the facts. Each policy will offer different levels of cover and will have a different price point.

There are a number of online tools available to help navigate the world of insurance, and ASIC’s MoneySmart website is a great place to start. Most super funds will also have tools, like our Insurance Quote Calculator that can help you gauge the level of cover you need and what it might cost.

You can also speak to a financial professional if you’re thinking about insurance cover outside of super. If you take that route, be sure to ask for quotes from a number of insurers and compare them to what you can get through your super fund.

¹ Trudy Jenkins is employed by NGS Super Pty Ltd and is also an Authorised Representative (1234906) of Guideway Financial Services Pty Ltd (“Guideway”) ABN 46 156 498 538, AFSL 420 367 and provides advice under the Guideway AFSL.