Your Personal CFO considers that financial planning during this period of your life should include a personal insurance strategy. We generally recommend that Life/TPD cover is best held via superannuation as it provides access to binding death nominations and reduces the real cost of insurance via superannuation contributions. Your superannuation fund cover should include:
- To extinguish all debt and free your family of financial burden.
- Lump sum investment to provide ongoing income for at least 12 to 20 years. (depending on ages of spouse and children)
- Funding to cover all educational expenses.
Total and Permanent Disability (TPD)
- An additional amount for funding ongoing care and assistance and future capital expenses, e.g. house modifications/maintenance, car upgrade/modifications.
- This can be reduced where there is already an appropriate level of Income Protection to ensure debt-free living.
- Depending on your cash flow position, this can be arranged via superannuation or held in your personal name.
- Should include a long-term benefit payment period until age 65 (or longer) to ensure the policy will pay for the maximum period in the case of a long-term claim.
- Waiting period should be appropriate (generally 30 or 90 days) and is dependent on the accrued sick leave, annual leave and savings available.
- Tax implications should be considered when deciding upon the structure to hold the income protection insurance.
Critical Illness (Trauma)
- Claims are most often related to cancer and the level of cover should consider funding for specialist medical attention and access to expensive non-PBS medications.
- The level of cover should consider funding for mortgage commitments over 2-3 years for a stress-free recovery period and short-term loss of income while the income earner ceases work to aid their spouse’s recovery.
Note: A non-working spouse should consider Life/PTD and Trauma cover.
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