Counting the Cost of a Curveball

February 2019 | Investments

Here’s a confronting question: what would you do if the main breadwinner in your household could no longer bring in an income? Do you have a Plan B? Most people don’t. That’s where insurance comes in.

Curveballs. They’re unexpected, often deceptive and it’s impossible to predict their trajectory. That’s why they’re so devastating – in sport and in life. There’s some interesting data available about the kind of curveballs that can impact your life, your finances and your retirement.

The headline figure is this: one in three Australians could be disabled for more than three months before turning 651. If you combine this with another startling fact – that 60% of Australian families with dependents will run out of money if the main breadwinner can no longer bring in an income – you can see the problem. Curveballs are pretty common, but so few people are prepared for them.

With the mortgage to pay, school fees to fund and day-to-day living expenses to meet, you could run down your savings very quickly and face financial difficulty.

The table below shows what’s at stake in terms of potential earnings to age 65. For example, if you are currently 45 and earn $80,000 per annum, you could earn around $2.15 million over the next 20 years. Isn’t that worth protecting?

Current Income (per annum) Age Now
25 35 45 55
$40,000 $3,020,000 $1,900,000 $1,070,000 $460,000
$60,000 $4,520,000 $2,850,000 $1,610,000 $690,000
$80,000 $6,030,000 $3,810,000 $2,150,000 $920,000
$100,000 $7,540,000 $4,760,000 $2,690,000 $1,150,000

Assumptions: Income increases by 3% per annum. No employment breaks. Figures rounded to nearest $10,000.

What kind of Plan B do you need?

The last thing you need to worry about when you’re dealing with a curveball is your finances. That’s where insurance comes into its own. It’s a well-known saying that you only realise the value of insurance when you need it – and you don’t have it.

Taking out Income Protection insurance could provide you with a monthly benefit of up to 75% of your income to replace lost earnings while you recover from an illness or injury.

Most Income Protection policies offer a range of waiting periods before you start receiving the insurance benefit (with options normally between 14 days and two years). You can also choose from a range of benefit payment periods, with a maximum cover generally available up to age 65.

Other things to consider

  • Income Protection insurance premiums will generally be lower if you choose a longer waiting period and shorter benefit payment period.
  • If you don’t have sufficient cash flow to fund the Income Protection premiums, you may want to arrange the cover in superannuation, where the cost will be deducted from your account balance.
  • If you maintain Income Protection insurance outside of your superannuation, your premiums may be tax-deductible.
  • Other curveballs you may want to insure for include critical illness (such as cancer and stroke), total and permanent disability and death. These curveballs can be covered by different types of life insurance, which you may want to consider.

To find out more please contact us on (08) 9227 6300 or .

1 Calculations based on data from the Institute of Actuaries of Australia 2000. Interim Report of the Disability Committee. IA Aust: Sydney.

Important information and disclaimer

This publication has been prepared by AustAsia Group, including AustAsia Financial Planning Pty Ltd AFSL License No 229454.

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information.

Information in this publication is accurate as at the date of writing, 15 February 2019. The information has been provided to us by a third party. While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way.

Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of AustAsia Group, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.

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