While COVID has placed greater emphasis on business continuity and contingency planning, many business owners fail to consider a personal contingency plan for their most valuable asset.
Your ability to earn an income is your most important asset, and for business owners, safeguarding your income is particularly important.
If you were unable to work, would you be able to meet your personal financial commitments? What about professionally? Could you afford to pay a salary for someone else to look after your business if you were unable to work for an extended period of time?
If you answered no to any of these questions, you should consider income protection insurance as a matter of priority.
Personal insurance, including income protection insurance, is about protecting your lifestyle and against personal financial risk by maintaining an income stream in the face of misfortune. Current income protection insurance protection usually pays up to 75% of your income in the event of an accident or illness, until you are able to return to work. New rules commencing on 1 October 2021 will cap income protection payouts to 70% of pre-disablement income during the benefit period. The benefit period will also be limited to a maximum of five years, with a right to renew cover.
While most businesses have business insurance and buy-sell agreements in place to protect their business interests, the same cannot be said for personal insurances.
It is estimated that just 33% of working Australians have income protection insurance,[1] and only around 40% have life insurance, despite having high levels of financial anxiety.[2] And, around 1 in 6 of those who are insured aren’t sure they have enough cover or know how much cover they have.[3]
And while you might think ‘it will never happen to me’, statistics tell a different story with the rise of mental illness and prevalence of long-term chronic health conditions such as cancer on the rise.[4]
Appropriate personal risk protection strategies should form an important part of protecting your personal financial position and should be a consideration as part of your overall personal financial plan.
If you, or family members such as adult children have been considering, but not yet implemented your income protection policy, now is the time to act.
There are many complexities associated with personal insurances, so it’s extremely important to seek professional advice to help you choose the personal insurances that are appropriate for your circumstances. In our experience working with clients, providing a sounding board to talk through needs and providing advice that is specific and appropriate to personal and business circumstances is the key to achieving great outcomes.
To find out more about creating a contingency plan to protect your lifestyle and assets, I encourage you to contact us today on 03 9708 8801 or email info@rvpartners.com.au.
General Advice Disclaimer: The information contained on this webpage has been provided as general advice only. The contents have been prepared without taking account of your objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this webpage, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.
[1] https://www.ricewarner.com/wp-content/uploads/2018/07/Final_Underinsurance-in-Australia-2017-infographic.pdf
[2] https://www.choosi.com.au/choosi/media/documents/Choosi-Dollar-report-whitepaper.pdf
[3] https://www.choosi.com.au/choosi/media/documents/Choosi-Dollar-report-whitepaper.pdf
[4] https://www.blackdoginstitute.org.au/resources-support/wellbeing/workplace-wellbeing/ and https://www.cancer.org.au/cancer-information/what-is-cancer/facts-and-figures
