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Ensure your children are insured

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29 November 2016

By Noel Whittaker, Cuffelinks.

John is one of the first baby boomers. Born in January 1946, he has just turned 69 and is living a full life in retirement. His career started in banking then moved to financial advising, so he is well experienced in the way the various asset classes work.

He has been a golfing mate of mine for years, so it was great fun recently to join him on the stage where he shared his experiences with an audience of retirees.

He’s a practical guy, and started by confessing he’d become a grumpy old man with a strong opinion on everything, which made life unpleasant at home when talkback radio was turned on. He suggested a better radio station for retirees is one of those that plays 1960s music.

One message he gave really hit the mark, because I’ve never heard any financial person mention it before. The topic was life insurance. The natural reaction is to ask why this topic would be relevant to retirees, because they would be unlikely to need it or to be able to afford it.

“No,” he said. “It’s not for you, it’s for your children.” In his experience as a financial adviser, John has seen all the problems that can happen when a family has insufficient insurance, and has long insisted that all his children be insured to the hilt.

This includes life insurance, total and permanent disability (TPD) insurance, trauma insurance, and income replacement insurance.

He then told us about his daughter, who had twin babies, and who three years ago was diagnosed with breast cancer. She had a high paying executive job, and the combination of her income replacement insurance and her trauma insurance meant the family had enough funds available to handle their mortgage payments and the treatment that her condition required. She lived in a large provincial town and full oncology treatment was only available 1,000 kilometres away in the nearest capital city.

The good news is that the treatment appears to have worked, and she is now in remission.

Then John delivered the clincher. “Imagine you’re in a comfortable retirement with a substantial nest egg and enjoying the fruits of all your hard work – how are you going to react when one of your children rings to tell you they’ve been diagnosed with a serious illness? Are you going to tell them it’s up to them, or are you going to dig into your own savings to rescue them?”

Illness is something we all think is going to happen to somebody else and insurance, like making a will, is something that’s easy to put off. It’s only when the problems start that we realise it’s too late to do anything about it.

John concluded, “A serious illness is bad enough, but if one partner dies, or is permanently incapacitated, the surviving partner may be unable to continue at work and care for the children at the same time. If that happened, it may be the grandparents who end up taking care of the children.”

Getting your children to take out sufficient insurance is an important and emotive matter, and one that is never over in a single conversation, which is why it’s important to involve your financial adviser. Often, premium affordability is a stumbling block but life and TPD premiums can come from their super. Income protection premiums are tax deductible. Only trauma cover premiums have to come from post-tax dollars.

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