In a nutshell, income protection is a long-term insurance benefit designed to replace or supplement your income in the event of illness or injury which temporarily or permanently prevents you from earning an income. While you may not perceive this to be a risk, bear in mind that the risk of a temporary illness or injury is much greater than the risk of dying, becoming permanently disabled, or contracting a dread disease.
While your natural instinct may be to put your own retirement funding on hold so as to prioritise your child’s education funding, be careful of taking this approach. Remember, while it may be possible to borrow for your child’s tertiary education, it’s not possible to borrow for your retirement.
When applying for life insurance, you will be required to provide information on your smoker status and insurers rely on you to provide accurate information in this regard. If you are a smoker, your premiums will be adjusted upwards to account for the risk that you present to the insurer. With the evolution of vaping, e-cigarettes and nicotine replacement therapies, this area of insurance has become more complex.
With financially dependent adult children, this life stage is critical when it comes to fine-tuning your retirement plan, settling debt, and structuring your assets. Having increased your net worth, reduced your home loan debt, and with fewer financial dependants, it is likely that you will be in a position to trim back on your life cover somewhat. Any savings achieved from reducing your life cover can be put to good use in bolstering your retirement funding.
Operating on a single income, give careful thought as to whether you will be able to afford domestic help after the baby arrives. If not, are you comfortable to do the cleaning, laundry and general housework? Will you be able to manage it all on your own? How will you feel moving from holding down a career to being a housekeeper? To what extent will it affect your relationship?
Making financial decisions when stressed, worried and fearful for the future can result in poor decision-making. Remind yourself that this crisis is temporary and, if necessary, find yourself a financial advisor who will partner with you and guide you through the emotions you are experiencing.
In the aftermath of being diagnosed with a life-limiting illness, it is inevitable that medical care and not financial planning will be top-of-mind – and understandably so. In time, however, it will be necessary to re-calibrate one’s financial planning so as to take into account the diagnosis and subsequent prognosis. Life-limiting illnesses can include cancer,…