Protecting yourself through all stages of Life
Disaster-proofing your financial situation is essential to protect those who depend on you. By using life insurance, income protection, trauma insurance and total and permanent disability insurance you can ensure that your financial plan is ‘self-completing’ should sickness, injury or death ever occur.
Of course everyone’s situation and particular need for each type of cover will vary and the only way to structure an effective plan is to undertake a thorough risk analysis so that a personalised protection strategy can be formulated. Having said that, there are certain risk exposure characteristics that generally apply to certain age bands. The following 5 stage model gives a quick reference as to what these typical risk characteristics are. This may be useful in helping you understand how risk protection priorities can vary at various life stages.
15-24 Youthful Yearnings
You may feel that there is no need for cover in the early part of this stage, but there is merit in parents putting cover in place so that their children have some future insurability secured. Once you become financially self-sufficient you can at least continue that cover yourself, even if you have medical issues that would otherwise render you uninsurable. The latter half of this stage sees the beginning of responsibilities, such as cars, credit cards and possibly a first home. These commitments bring the need for a protection plan to cover your liabilities.
25-34 Mortgage Madness
Marriage and children often occur during this stage and along with that comes the expense of running a home and providing for dependents. Your income may be growing, but it is increasingly committed to a burgeoning list of expenses. Protection plans are essential to securing an independent way of covering these expenses, in case you are not able to meet them. This would generally include the full range of life, disability and trauma insurance to cover all contingencies.
35-44 Changes and Choices
During this stage family income is normally starting to peak, especially when initial child rearing is complete and both spouses are working. Retirement and investment planning options may then open up, but still there will usually be an even higher level of financial commitments, such as a larger mortgage and the regular expenses that come with a higher standard of living. Risk protection plans are therefore just as important for ensuring financial independence if disaster strikes.
45-55 Finally Free
The major expense burden of children may now be tapering off as they become more independent, there will still be substantial commitments to be serviced, such as your mortgage. These years may also see an increased level of risk through emerging health issues. This makes it essential to maintain comprehensive cover, even though there may be some scope to reduce cover levels.
60+ Rest and Recreation
With the mortgage perhaps paid off and children now well behind you, your commitments may be diminishing. Partial and then full retirement will occur and investment income will gradually replace earned income. While there are less responsibilities that need the blanket of risk protection, there are still needs for some levels of cover to fund family bequests and to cover final expenses, so that no financial burdens are passed on to children. Of course there may be significant variations to these five stages, depending on various life decisions and circumstances. For example, an increasing number of people choose to remain single through life, or there may be the complication of divorce to negotiate.
These situations present different priorities and needs, but there will always be some degree of protection needed whenever there are financial commitments to fulfil. If the five stages of risk protection have prompted questions about your risk protection strategy, then please contact us to arrange a chat.
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Rosanna Rossi
Rosanna Rossi has over 25 years experience delivering high quality financial services to clients. Rosanna was recently named as a Finalist for Financial Planner of the Year for the 2013 Money Management Women in Financial Services Awards.