It’s a pretty confronting scenario that thousands of Australians face the reality of every year: what would you do if the main breadwinner in your household could no longer bring in an income? Most people don’t have a backup plan. This is where insurance comes in.

Curve balls. They’re unexpected, often deceptive and it’s impossible to predict their trajectory. That’s why they’re so devastating – in sport and in life. There’s some interesting data now available about the kind of curve balls that can impact your life, your finances and your retirement.

The headline figure is this: one in three Australians could be disabled for more than three months before turning 65.1 If you combine this with another startling fact – that 60% of Australian families with dependents will run out of money if the main breadwinner can no longer bring in an income – you can see the problem. Curve balls are pretty common, but so few people are prepared for them.

With the mortgage to pay, school fees to fund and day-to-day living expenses to meet, you could run down your savings very quickly and face financial difficulty.

As Advisers, we say it again and again to clients who are inadequately insured; Why protect your home and your car with insurance, but not your income? Without an income, you may not have a house, nor a car to insure.

The table below shows what’s at stake in terms of potential earnings to age 65. For example, if you are currently 45 and earn $80,000 per annum, you could earn around $2.15 million over the next 20 years. Isn’t that worth protecting?

Assumptions: Income increases by 3% per annum. No employment breaks. Figures rounded to nearest $10,000.

What kind of backup plan do you need?
The last thing you need to worry about when you’re dealing with one of life’s curve balls is your finances. It’s very well known amongst Advisers that you only realise the value of insurance when you need it – and you don’t have it. As independent financial Advisers, we are at the forefront of insurance claims. We see the difference in lifestyle and financial outcomes for those who have insurance versus those who don’t. And the difference is palpable.

Taking out Income Protection insurance could provide you with a monthly benefit of up to 75% of your income to replace lost earnings while you recover. It will continue to support you until you can return to your duties, or depending on the policy, duties that are suitable. If you have Income Protection, it is certainly worth checking the definition for a return to work, some policies continue to support you until a full return to your duties in which you are skilled or qualified, whilst others specify a return to any form of paid employment, which could see you within a role that you are overqualified for.

Most Income Protection policies offer a range of waiting periods before you start receiving the insurance benefit (with options normally between 14 days and two years). You can also choose from a range of benefit payment periods, with a maximum cover generally available up to age 65.

Other things to think about
• Other curve balls you may want to insure for include critical illness (such as cancer and stroke), total and permanent disability and death. These life events can be covered by different types of life insurance, which you may want to consider.

To find out more, or to have an independent financial adviser review you existing policy, you can contact us here or on (03) 9999 7200.

1 Calculations based on data from the Institute of Actuaries of Australia 2000. Interim Report of the
Disability Committee. IA Aust: Sydney.

Disclaimer: The information on this site is of a general nature only. This is not a recommendation or endorsement of any product or investment. It does not take your specific needs or circumstances into consideration. You should look at your own personal situation and requirements before making any financial decisions or consult the advice of an accountant or financial adviser.