It is an unfortunate fact that the majority of people would not be able to maintain their lifestyle for more than a couple of months with no income. However, in these uncertain times, when budgets are stretched, it can be tempting to risk being uninsured to save on premium payments. But this is rarely the best choice to make, even when money is tight.

Personal risk insurance underpins a critical part of the financial planning process, as it ensures the success and longevity of your financial plan. Planning for unforeseen events will allow you freedom of choice and the ability to protect your assets and sustain your investment portfolio, even in hard times.

Many of us recognise the importance of covering our assets in the event of death, especially when we take out a mortgage or have other liabilities. However, most people overlook the difficulty that can be placed on your financial position due to illness or injury. For example, being unable to work due to illness or injury can, make it hard to meet regular living expenses, let alone continue a savings plan, pay school fees or repay debt.

Case study

John, a 51-year-old sales manager, is married with two teenage children. After John’s doctor discovered that he had bowel cancer, John stopped work immediately to undergo surgery. His private health insurance allowed him the choice of hospital and surgeon. The surgeon removed the section of bowel affected by cancer and John then underwent extensive chemotherapy.

John had income protection insurance that covered him for 75% of his income, which meant he was able to cover his family’s ongoing essential living expenses. At the same time the insurance protection cover was arranged, a trauma insurance policy was also established (John already had adequate life insurance through his work superannuation fund).

So, in addition to receiving the ongoing income from his income protection insurance, John’s trauma insurance policy provided a lump sum payment of $200,000 when he was diagnosed with the cancer. This payment allowed John’s wife Jane to take three months off work to care for him in between chemotherapy cycles.

John’s treatment lasted for several months. He made a complete recovery and was eventually able to return to work. During the time he was ill, John and his family were able to maintain their lifestyle and John and Jane had the peace of mind that their financial affairs were being taken care of in their time of need.

If you are unsure of whether your existing personal risk insurances are appropriate for your circumstances, or you are uninsured and would like to review your situation, please contact us. It may well save your financial life!