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

How much do you need to retire comfortably?

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

banner

Most viewed in recent weeks

Meg on SMSFs: Clearing up confusion on the $3 million super tax

There seems to be more confusion than clarity about the mechanics of how the new $3 million super tax is supposed to work. Here is an attempt to answer some of the questions from my previous work on the issue. 

Welcome to Firstlinks Edition 566 with weekend update

Here are 10 rules for staying happy and sharp as we age, including socialise a lot, never retire, learn a demanding skill, practice gratitude, play video games (specific ones), and be sure to reminisce.

  • 27 June 2024

Australian housing is twice as expensive as the US

A new report suggests Australian housing is twice as expensive as that of the US and UK on a price-to-income basis. It also reveals that it’s cheaper to live in New York than most of our capital cities.

The catalyst for a LICs rebound

The discounts on listed investment vehicles are at historically wide levels. There are lots of reasons given, including size and liquidity, yet there's a better explanation for the discounts, and why a rebound may be near.

How not to run out of money in retirement

The life expectancy tables used throughout the financial advice and retirement industry have issues and you need to prepare for the possibility of living a lot longer than you might have thought. Plan accordingly.

The iron law of building wealth

The best way to lose money in markets is to chase the latest stock fad. Conversely, the best way to build wealth is by pursuing a timeless investment strategy that won’t be swayed by short-term market gyrations.

Latest Updates

Investment strategies

Have value investors been hindered by this quirk of accounting?

Investments in intangible assets are as crucial to many companies as investments in capital equipment. The different accounting treatment of these investments, however, weighs on reported earnings and could render ratios like P/E less useful for investors.

Investment strategies

Investors are threading the eye of the needle

As investors cram into ever narrower areas of the market with increasingly high valuations, Martin Conlon from Schroders says that sensible investing has rarely been such an uncrowded trade.

Economy

New research shows diverging economic impacts of climate change

There is universal consensus that the Earth is experiencing climate change. Yet there is far more debate about how this will impact different economies across the globe. New research sheds more light on the winners and losers.

SMSF strategies

How super members can avoid missing out on tax deductions

Claiming a tax deduction for personal super contributions can end in disappointment if it isn't done correctly. Julie Steed looks at common pitfalls and what is required for a successful claim.

Investment strategies

AI is not an over-hyped fad – but a killer app might be years away

The AI investment trend looks set to continue for years but there is only room for a handful of long-term winners. Dr Kevin Hebner also warns regulators against strangling innovation in the sector before society reaps the benefits.

Retirement

Why certainty is so important in retirement

Retirement is a time of great excitement but it is also one of uncertainty. This is hardly surprising given the daunting move from receiving a steady outcome to relying on savings and investments.

Economy

This vital yet "forgotten" indicator of inflation holds good news

Financial commentators seem to have forgotten the leading cause of inflation: growth in the supply of money. Warren Bird explains the link and explores where it suggests inflation is headed.

Sponsors

Alliances

© 2024 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. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. 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.