It has often been said that the difference between success and failure is having a plan in place. As with many things in life, the earlier you get started on your plan, the more successful the future outcome will be. This is particularly true with regards to building and protecting your wealth. A vital aspect of longer term financial planning which is regularly overlooked is the importance of obtaining adequate personal risk protection cover.
Adequate risk protection cover such as Death, Total & Permanent Disability, Trauma and Income Protection provides the foundation onto which you will build the structure for your accumulation of wealth into the future.
Now that the new financial year has ticked over again, it may be timely to ensure that you have sufficient protection in place as a contingency plan for what may happen in the future. A wealth protection strategy will reduce the risk of you and your family not achieving your financial goals.
Starting out in life, you may have very little in savings and debts to manage. If a family comes along, you should also consider how you will provide for your family and clear your debts if the unexpected occurs, particularly if you rely on one income.
Taking out cover while you are young and healthy will pay off in the long run. If you purchase cover earlier in life, you will have access to lower premiums and you are less likely to have your cover restricted due to health conditions which are more prevalent as we get older.
Relying on your default cover via your superannuation to provide comprehensive protection for your specific needs is an all too common trap which should be avoided. You may have an automatic level of cover on joining your fund, and this will rarely provide the benefits required to pay off the average mortgage, and cover future expenses for your partner and/or kids if you die, or stop working because of an accident or illness.
A long term strategy to consider is obtaining cover under Level premiums, instead of the more popular and initially cheaper option of Stepped premiums. Stepped premiums will increase annually based on the higher probability of you claiming as you get older. Unfortunately, many people with stepped premium protection in their later years, have to reduce or consider cancelling their cover, due to premium increases at the time when they may need it most.
A Level premium will ‘future proof’ your wealth protection as the premium will increase annually based on CPI, rather than increasing age risk factors. When you are older, you will be able to maintain your cover as the premium has been averaged over the life of the policy. On face value, stepped premiums appear to be the cheaper option when you are young, but Level premiums provide the longer term security to hold your valuable cover into the future.
Just remember, sometimes more is lost by inaction, rather than action. Plan for the future today so you don’t regret your inaction tomorrow.