Being in the financial services industry, we naturally assume all our clients have income protection and risk insurance – because to us it just makes sense.
When starting this article our intention was to encourage you to have conversations with your adult children about protecting their income at an early age – before ‘life’ simply happens to them.
Then with the research we found that it’s not just the younger generation, but a staggering 69% of Australians do not have income protection.
So our intention is still the same – educate your adult children on how to protect their most valuable asset – their income. However, if this also applies to you, then take action!
In our line of work, we see lots of things. Mostly great, however life is full of surprises and not all of them are pleasant.
The Importance of Income Protection
Injuries and illnesses can strike when you least expect them. They often create a financial storm in the midst of life’s challenges. This is when income protection insurance steps in, offering a ray of hope in the face of adversity. It’s a proactive measure that can significantly reduce the stress and anxiety that accompanies the inability to work during difficult times.
Yet, it’s disheartening to note that many Australians still hesitate to embrace the security of income protection insurance. While a substantial 83% of us recognize the importance of insuring our vehicles with car insurance (something relatively easy to replace), a mere 31% have taken the necessary steps to safeguard their most valuable asset – their income.
Safeguarding Your Income
For many, the thought of safeguarding their income at a young and healthy age may not seem like a priority and an unnecessary expenditure. However, it’s crucial to understand the importance of obtaining income protection while they’re fit and free from ailments that could potentially limit their coverage in the future.
The Age Dilemma
The question of when to invest in income protection is often debated. To shed light on this matter, let’s delve into some eye-opening statistics.
On average, most people consider income protection around their late 30s or early 40s. However, by that time, they may have missed the golden opportunity to secure the best possible coverage.
According to recent data, only a meager 10% of young adults in their 20s invest in income protection. The majority wait until they’re well into their 30s or 40s. This delay can have significant consequences. Young adults often underestimate the potential future risks and health issues they face as they become older and the financial havoc they can wreak without this insurance.
The Case for Early Income Protection
1. Lower Premiums
One of the most compelling reasons to invest in income protection at a younger age is the cost. Premiums are considerably lower for young, healthy individuals. As you grow older, the likelihood of health issues and other factors that could impact your insurability increases, resulting in higher premiums.
2. No Pre-existing Condition Worries
Obtaining income protection early provides an opportunity to secure coverage before you experience health conditions. This is crucial because once health issues arise, insurers tend to exclude pre-existing issues from coverage later on, or charge much higher premiums. This can make your premiums an expensive proposition.
3. Long Term Security
Income protection isn’t just about protecting your present. It’s about securing your financial future. By starting young, you ensure that you’re covered for a more extended period. This is essential as accidents and illnesses can strike at any time. Having long term coverage can be a financial lifesaver.
The Consequences of Delay
Now, let’s take a closer look at the statistics related to people who do not have income protection. The numbers tell a compelling story.
1. Financial Vulnerability
A shocking 60% of Australians between the ages of 30 and 65 do not have income protection. This leaves them in a vulnerable position with no safety net to catch them if they can’t work due to illness or injury.
2. Strained Savings
Without income protection, many individuals must rely solely on their savings if they can’t work for an extended period. This often results in depleting their hard-earned savings and pushes them into a financial abyss.
3. Family Impact
The consequences of not having income protection ripple through families. It’s not just the individual who suffers but their loved ones too. Without a steady income, financial stress can strain relationships and lead to emotional distress.
When Do You Need Income Protection?
You might wonder when exactly income protection becomes a necessity. The truth is, it’s a crucial safety net for anyone who relies on their income, but there are specific life situations where its importance is magnified.
Young Families: If you have a young family, you need income protection to ensure that your loved ones are financially secure, even if you can’t work.
Debt Obligations: If you have substantial debts such as a mortgage or student loans, income protection ensures that you can meet your financial commitments even if you can’t work.
Self-employed Individuals: If you’re self-employed, your income is directly tied to your ability to work. Income protection provides you with peace of mind and financial stability in case you’re unable to work due to an accident or illness.
High Earners: Even high-income individuals should consider income protection. While they may have more savings, their financial commitments are often greater, making the need for income protection equally significant.
Sole Breadwinners: If you’re the primary income earner in your family, income protection is non-negotiable. It ensures that your loved ones can maintain their standard of living in your absence.
In the journey of life, unexpected twists and turns are inevitable. Income protection is not just about protecting your earnings; it’s about safeguarding your dreams, your family, and your peace of mind.
The statistics are clear – early investment offers lower premiums, no pre-existing condition worries, and long-term security.
It’s a compelling choice, a financial lifeline that ensures your future is as secure as your present. Don’t just hope for the best – prepare for it.
Don’t wait until it’s too late. Tell your adult kids to start thinking about income protection today when they’re young, fit, and healthy. If you need additional tips on improving your overall financial well-being, click here.
And if you don’t have it, then reach out today for a discussion on how we can help you obtain it.