Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 107

Ensure your children are insured

John is one of the first baby boomers. Born in January 1946, he has just turned 69 and is living a full life in retirement. His career started in banking then moved to financial advising, so he is well experienced in the way the various asset classes work.

He has been a golfing mate of mine for years, so it was great fun recently to join him on the stage where he shared his experiences with an audience of retirees.

He’s a practical guy, and started by confessing he’d become a grumpy old man with a strong opinion on everything, which made life unpleasant at home when talkback radio was turned on. He suggested a better radio station for retirees is one of those that plays 1960s music.

One message he gave really hit the mark, because I’ve never heard any financial person mention it before. The topic was life insurance. The natural reaction is to ask why this topic would be relevant to retirees, because they would be unlikely to need it or to be able to afford it.

“No,” he said. “It’s not for you, it’s for your children.” In his experience as a financial adviser, John has seen all the problems that can happen when a family has insufficient insurance, and has long insisted that all his children be insured to the hilt.

This includes life insurance, total and permanent disability (TPD) insurance, trauma insurance, and income replacement insurance.

He then told us about his daughter, who had twin babies, and who three years ago was diagnosed with breast cancer. She had a high paying executive job, and the combination of her income replacement insurance and her trauma insurance meant the family had enough funds available to handle their mortgage payments and the treatment that her condition required. She lived in a large provincial town and full oncology treatment was only available 1,000 kilometres away in the nearest capital city.

The good news is that the treatment appears to have worked, and she is now in remission.

Then John delivered the clincher. “Imagine you’re in a comfortable retirement with a substantial nest egg and enjoying the fruits of all your hard work – how are you going to react when one of your children rings to tell you they’ve been diagnosed with a serious illness? Are you going to tell them it’s up to them, or are you going to dig into your own savings to rescue them?”

Illness is something we all think is going to happen to somebody else and insurance, like making a will, is something that’s easy to put off. It’s only when the problems start that we realise it’s too late to do anything about it.

John concluded, “A serious illness is bad enough, but if one partner dies, or is permanently incapacitated, the surviving partner may be unable to continue at work and care for the children at the same time. If that happened, it may be the grandparents who end up taking care of the children.”

Getting your children to take out sufficient insurance is an important and emotive matter, and one that is never over in a single conversation, which is why it’s important to involve your financial adviser. Often, premium affordability is a stumbling block but life and TPD premiums can come from their super. Income protection premiums are tax deductible. Only trauma cover premiums have to come from post-tax dollars.

 

Noel Whittaker is the author of Making Money Made Simple, and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. See www.noelwhittaker.com.au.

RELATED ARTICLES

The insurance essentials

Should I pay off the mortgage or top up my superannuation?

Poor pricing of life insurance products and the impact on Australians

banner

Most viewed in recent weeks

10 little-known pension traps prove the value of advice

Most people entering retirement do not see a financial adviser, mainly due to cost. It's a major problem because there are small mistakes a retiree can make which are expensive and avoidable if a few tips were known.

Check eligibility for the Commonwealth Seniors Health Card

Eligibility for the Commonwealth Seniors Health Card has no asset test and a relatively high income test. It's worth checking eligibility and the benefits of qualifying to save on the cost of medications.

Hamish Douglass on why the movie hasn’t ended yet

The focus is on Magellan for its investment performance and departure of the CEO, but Douglass says the pandemic, inflation, rising rates and Middle East tensions have not played out. Vindication is always long term.

Start the year right with the 2022 Retiree Checklist

This is our annual checklist of what retirees need to be aware of in 2022. It is a long list of 25 items and not everything will apply to your situation. Run your eye over the benefits and entitlements.

At 98-years-old, Charlie Munger still delivers the one-liners

The Warren Buffett/Charlie Munger partnership is the stuff of legends, but even Charlie admits it is coming to an end ("I'm nearly dead"). He is one of the few people in investing prepared to say what he thinks.

Should I pay off the mortgage or top up my superannuation?

Depending on personal circumstances, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. Do the sums and ask these four questions to plan for your future.

Latest Updates

Investment strategies

Three ways index investing masks extra risk

There are thousands of different indexes, and they are not all diversified and broadly-based. Watch for concentration risk in sectors and companies, and know the underlying assets in case liquidity is needed.

Investment strategies

Will 2022 be the year for quality companies?

It is easy to feel like an investing genius over the last 10 years, with most asset classes making wonderful gains. But if there's a setback, companies like Reece, ARB, Cochlear, REA Group and CSL will recover best.

Shares

2022 outlook: buy a raincoat but don't put it on yet

In the 11th year of a bull market, near the end of the cycle, some type of correction is likely. Underneath is solid, healthy and underpinned by strong earnings growth, but there's less room for mistakes.

Gold

Time to give up on gold?

In 2021, the gold price failed to sustain its strong rise since 2018, although it recovered after early losses. But where does gold sit in a world of inflation, rising rates and a competitor like Bitcoin?

Investment strategies

Global leaders reveal surprises of 2021, challenges for 2022

In a sentence or two, global experts across many fields are asked to summarise the biggest surprise of 2021, and enduring challenges into 2022. It's a short and sweet view of the changes we are all facing.

Shares

2021 was a standout year for stockmarket listings

In 2021, sharemarket gains supported record levels of capital raisings and IPOs in Australia. The range of deals listed here shows the maturity of the local market in providing equity capital.

Economy

Let 'er rip: how high can debt-to-GDP ratios soar?

Governments and investors have been complacent about the build up of debt, but at some level, a ceiling exists. Are we near yet? Trouble is brewing, especially in the eurozone and emerging countries.

Sponsors

Alliances

© 2022 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.