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Hewison Insights

Insurance: a necessary cost that’s worth it

Chris Morcom
Partner/Private Client Adviser
1 Feb 2016

Many people view insurance as unnecessary and a cost that is to be minimised at all times. However, a recent experience has highlighted the need for appropriate insurance planning, even if it does mean the payment of some extra costs. 

Naturally, people carry an element of invincibility throughout their lives, with ill health or accidents being events that occur to “other unfortunate people.”  However, anyone can be struck down out of the blue by unexpected illness, cancer being one that immediately comes to mind.

Even if the illness is not life threatening, the cost to a family of its breadwinner being unable to work while he or she undergoes treatment can be financially stressful. This stress is magnified when that same person is a key individual in the family business, and/or if there is a substantial family debt level.

Reducing the level of financial stress can allow the individual concerned to focus on their recovery, and is one of the key reasons for having insurance.

The five main types of personal life insurance available are:

  • Income Protection: provides a monthly benefit up to 75 per cent of an individual’s pre-disability earnings. Premiums are tax deductible to the individual
  • Business Expenses: provides a monthly benefit to allow individuals or businesses to cover business expenses should they, or another key person to the business, be unable to work due to ill health. This is sometimes called Key Person Insurance, and there is some tax deductibility of premiums
  • Trauma: provides a lump sum to cover the cost of treatment and relieve financial stress in the event a defined trauma is suffered
  • Total and Permanent Disability: provides a lump sum should an individual become totally and permanently disabled
  • Death: provides a lump sum to the policy owner in the event of death or diagnosis of terminal illness.

Each of the above insurance types have different eligibility requirements and all should be considered as part of a holistic insurance plan. Some of the policies can also be arranged via superannuation to reduce the cash flow impact of holding appropriate amounts of insurance. 

While insurance may seem expensive to obtain, the cost of not being insured can be overwhelming should an unexpected illness occur. So be careful when arranging your insurance not to skimp on the amount of cover simply to save on premiums, you may regret such a decision in the long run.

Hewison Private Wealth partners with a highly competent insurance broker to ensure our clients have appropriate levels of cover and that policies remain appropriate over time. Should you wish to review your insurance or financial arrangements, please arrange a time to meet with one of our advisers.

Any financial product advice provided is general in nature. It does not consider your needs, financial situation or objectives. You should consider the appropriateness of this advice to your circumstances before you act on it.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.