Wealth protection is a vital part of financial planning.
We spend enormous amounts of time building our wealth, yet all it takes is one misfortunate event to throw us off track. A well-rounded wealth protection strategy provides a solid foundation for wealth accumulation. You’ll have peace of mind knowing your financial goals won’t be affected by unforeseen mishaps that may come your way.
How do I protect my wealth?
Protecting your wealth requires estate planning and having adequate insurances to cover your income and earning capacity. It’s similar to having insurances for your family home and car. Wealth protection insurances and estate planning will safeguard your finances and assets in the case of illness, injury or death. Adequate protection will reduce financial strain during an emotionally stressful time. You’ll still be able to meet your financial obligations and support your family even when you can’t generate an income.
What types of insurances will protect my wealth?
The different types of insurances that protect you from loss of wealth and earning capacity include:
- Income protection – you receive regular payments during the time you’re unable to work due to injury or illness. Use the funds to help stay on top of your loan repayments and living expenses.
- Trauma insurance – you receive a lump sum payment if you suffer from a major illness like heart attack or cancer.
- Total and permanent disability insurance – you receive a lump sum payment if you become permanently disabled.
- Term life insurance – pays a lump sum to the beneficiary in the event of death.
- Business insurance:
- Business expenses insurance – helps to keep your business running while you recover. Use the funds to make loan repayments, pay bills and other expenses while you focus on recovery.
- Key employee insurance – pays a lump sum if a key staff is unable to work. It helps to mitigate financial losses caused by loss of key staff. Use the funds to recruit and train a new person to get your business back on track.
- Capital protection insurance – pays a lump sum to cover the repayment of any business loans for which a business partner who has deceased was the guarantor.
Adequate insurance is crucial because you can’t predict when you’ll get sick and how long your recovery will take. Imagine falling ill for an extended period. Is your sick leave enough to cover your living expenses? Do you have enough savings to fund your medical treatment? Will your business survive without you? It can be a grim scenario.
Wealth protection insurances will help you and your family pay for general living expenses, medical bills, and debts. Some types of insurance premiums like income protection are tax deductible so it may not be as expensive as you think. If you have the option to purchasing your insurance through super, you’ll benefit from tax advantages by paying premiums with pre-tax dollars. It’s wise to speak to your financial advisor to find the right level of cover and best strategy for your needs.
5 points to consider with wealth protection insurance
Review your insurances and make sure it’s aligned with your level of risk and protection needs. Factors you need to consider include:
- Your debt levels and the amount you need to pay off all outstanding debts. Ask yourself this question – is my current insurance policy able to cover all my debts and look after my family?
- Medical expenses
- Tax implications
- Lifestyle requirements
- Retirement goals
Your insurance needs will change as you progress through life. If you’re someone with a young family, you’re likely to require more cover than someone who is single.
Wealth protection with estate planning
Estate planning needs to form part of your overall wealth protection strategy. It involves having legal documents such as a will, and appropriate asset holding structures in place to manage and transfer your assets upon death.
Proper estate planning is essential because:
- It protects your dependents.
- It provides clarity to how you want your assets to be distributed.
- It prevents family quarrels.
- It ensures you’re using tax efficient structures.
- It minimises processing time and unnecessary legal fees.
- It ensures your financial affairs are managed by someone you trust.
Estate planning is a complicated process. Seek professional legal and financial advice to ensure your assets are protected and managed appropriately. Your will also needs updating every few years, especially after any significant life-changing events.
Your wealth protection strategy will change over time. Different stages of life will bring forward new responsibilities. Contact Moiler for a comprehensive wealth protection analysis to ensure it’s aligned with your needs.
Other articles you may be interested in:
This document has been prepared by Moiler Associates Pty Ltd, an Authorised Representative of Count Financial Limited ABN 19 001 974 625; AFSL 227232 (“Count”) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124 and is for general information only. The presentation has been prepared without taking into account your personal objectives, financial situation or needs. You should assess whether the information is appropriate for your needs and consider talking to a Count Authorised Representative before making any investment decision or your legal representative if it relates to legal documents or agreements. The relevant PDS should be considered before making a decision about any financial product. The information is provided as an information service only and does not constitute financial product advice and should not be relied upon as financial product advice. 9 July 2018.