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WHAT RISKS COULD YOU FACE?

The scary statistics

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Males have a 1 in 5 chance of suffering a critical illness between 30 and 64 years of age

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Females have a 1 in 7 chance of suffering a critical illness between 30 and 64 years of age

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During a typical working life, a person has a 1 in 5 chance of being off work for more than 6 months

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In general, males are more likely to have a claim relating to an accident (39%) than females (21%)

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For white collar workers, the chance of suffering an accident is reduced to 24% but for blue collar workers it increases to 51%

CASE STUDY 1

Consider the Smith family – a couple in their 30s with two young children. Both parents work in order to pay the mortgage on their home and meet their living costs. Even though they have sensible spending habits, they don’t have much extra cashflow. What could happen to this family?

There is a:

  • 17% chance one of the parents will die before they turn 65
  • 9% chance of becoming totally and permanently disabled
  • 27% change of becoming temporarily disabled
  • 25% chance of suffering a critical illness

If one of the above events were to occur, the Smiths don’t have enough surplus cash flow to replace the lost income should one of them no longer be able to work. They stand to lose their home and suffer financial hardship at the exact time when they would be under significant emotional stress.

Unless they have insurance to cover such an eventuality.

While these statistics are scary, the right insurance cover can you give peace of mind that should the worst happen, your family will be taken care of.

CASE STUDY 2

Let’s now have a look at the Harrisons. Joel earns a good income as a lawyer and Sara is a stay-at-home mum looking after their four school-age children. They own their own home and although they have a substantial mortgage, Joel is easily able to cover this with his income.

They are also property investors with a portfolio of three buy-to-hold properties. The portfolio is negatively geared, as they are focusing on long-term capital growth. Because the rent they receive doesn’t cover the loan expenses on the properties, the repayments have to be topped up with Joel’s salary.

Out of the blue, Joel is diagnosed with a serious illness. He has to undergo extensive surgery and faces an extended recovery time, meaning he will be unable to work for at least 12 months.

Under ordinary circumstances, this family would be in dire straits. With no income to cover the debt on the home or the investment properties, they would be forced to sell their assets. Sara would need to manage this by herself, as well as looking after her husband and children, at the same time as trying to find employment to be able to put food on the table. Stressful is an understatement.

Luckily, several years previously, the Harrisons had discussed their situation with their insurance broker, who identified their risks and possible loss, and arranged insurance cover for them. Because of this, they are able to keep their home and rental properties, and have enough income to meet all their living expenses. This means they can focus on Joel’s recovery without any additional stress.

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