6 crucial questions you need to answer about protecting your financial security

Category: Australia & News

When planning your financial future, death or serious illness are not easy things to have to think about. 

Prematurely passing away, or being unable to work for an extended period, will create massive challenges for your loved ones. 

In each case, prior discussion and planning helps take the necessary steps to ensure they will be financially comfortable, even if you are no longer providing for them. 

Read why a review of your protection arrangements is so important, and how we can help you.

1. What happens to your family if you die?

A key first step when thinking about what will happen to your family when you pass on is to make sure they will be financially comfortable. 

You should consider your financial obligations, and how they will be managed if you’re no longer around, especially if you are the main or sole breadwinner. 

For example, you may have a large mortgage, which means they will have a big financial debt to fulfil. 

If you have children, you might have chosen to have them educated privately, with all the associated costs of school fees and other items that will entail. 

You will also want to ensure that they enjoy a comfortable life as they move towards adulthood, and that they have the means to be able to make choices in terms of what they want to do with their life and future career.

Then there are the everyday household costs that will need to be managed by your surviving spouse or partner, plus the provision of a sum of money to help them plan for their future. 

2. How would serious illness or incapacity affect your family lifestyle?

It’s possible that you and your family would struggle to make ends meet if your regular income was interrupted for an extended period through illness or incapacity. 

Your savings may well cover your essential outgoings for a certain length of time, but what would happen if your inability to work lasted several months, or you were unable to ever work again?

Thanks to medical advances, suffering from a serious illness such as cancer or a stroke may not be terminal, and you may be able to enjoy a decent quality of life. So, you need to consider how you’ll be able to fund your lifestyle if you’re not working. 

3. Have there been recent changes in your family circumstances?

The type of insurance and amount of cover you need will be dependent on your current circumstances. So, even if you think your existing arrangements are sufficient, you should always look to review them if your circumstances change. 

The type of life changes that should prompt such a review include:

  • Divorce or remarriage
  • Your children growing up and leaving home
  • An increase or decrease in your debt level
  • Changing your job or starting your own business.

Failing to review your insurance arrangements could result in you having too much or too little cover. 

This could result in paying for something you may not actually need or, conversely, you or your family being left with insufficient financial support if something happened to you.

4. What would be the financial effect of your spouse or partner dying?

There may be a temptation for you to look at your family’s financial security from your own point of view, especially if you are responsible for most, or all, of the household income.

But even if they aren’t earning an income, it’s important to consider the financial impact of the death or incapacity of your partner or spouse.

For example, their death, or them suffering from a long-term illness, may result in you having to stop working for a time to look after your children or other family members.

It’s clearly something that isn’t pleasant to have to think about, but the potential effect could be devastating. So, ensuring you have plans in place will give you, and them, valuable peace of mind.

5. How would your family cope with your outstanding debts?

Having a certain amount of debt is almost inevitable. In some respects your mortgage can be seen as “good” debt, as it’s secured on an asset that should appreciate in value over time.

In addition to this, one of the most popular forms of life insurance is a simple policy taken out at the same time as your mortgage loan.

However, you should also consider any unsecured debts you may have. Your family are likely to become liable for these in the event of your death, so it’s important to take steps to ensure the means are in place to repay these when you pass on.

6. If you own a business, what would happen if you died?

If you own your own business, you very possibly see it as your long-term legacy to your family, especially if you’re planning to pass it on to your children when you retire. 

So, you’ll want to take steps to ensure it has a stable financial future in the event that you aren’t there to be able to run it. 

Consequently, you should be aiming to ensure your business can still operate effectively, in the event of you suffering from a long-term or terminal illness. 

In addition, much of your wealth may also be tied up in your business, and your loved ones may not be interested in involving themselves in the day-to-day running of a company. So, it’s also important to ensure the right arrangements are in place to ensure your family receive your financial stake.

It’s time for a life insurance review

If you’re struggling with the answers to any of those six questions, or even if they’ve just given you food for thought, then a life insurance and protection review with a financial expert is highly recommended. 

Such a review will include a full analysis of your current circumstances and future plans.

You will then have a clear idea of the best course of action and steps you need to take for you to ensure your financial future security, and that of your loved ones.

Get in touch

If you would like to discuss reviewing your existing protection arrangements, or you have any queries regarding your financial planning, please get in touch with us. 

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. 

All contents are based on our understanding of ATO and HMRC legislation, which is subject to change.