Wealth Protection includes insuring against personal risk!
Wealth protection is an essential part of every wealth creation strategy: using life insurance to provide financial protection for when there is an insurable interruption to the accumulation strategy is an economically sound strategy. Without an adequate life insurance portfolio the wealth you have built up (or are in the process of establishing) can rapidly erode as the costs of attending to the cause of the interruption are paid and the income-generation process is interrupted. As a further financial concern, the investment strategies you are seeking to achieve (including retirement planning or estate planning) can be ‘derailed’ as a result of a serious accident or illness interrupting your ability to make the planned contributions to accumulating funds.
What would be the financial consequences if you are injured, become ill – or die?
Would your family or other ‘dependants’ (including business partners) remain financially secure?
How would you cope financially if you were no longer able to work either for an extended period of time; or permanently (through accident, illness or injury)?
Business owners bear additional layers of wealth protection risk
The family consideration:
If your income (whether from wages earned from an arms-length employer; or earnings from your own business) is supporting a family and/ or other dependants, you may feel an obligation to ensure that their financial position is not put at risk because of an event in your life that could have been protected from a financial point of view.
Home mortgages need to be paid; children’s education costs continue; business debts still need to be serviced; health costs arise and need to be met; and food and clothing needs also persist – and in the absence of an income stream, will diminish your accumulated ‘nest egg’ (that is, your non-superannuation nest egg): unless you are adequately insured.
The business partnership consideration:
Family-owned businesses, whether a single- or multi-family businesses, can provide for an orderly succession of ownership and management so as to avoid situations where family connections not interested in, available for, or competent, to participate in the business can be financially provided for – and not ‘forced’ into situations that could lead to business and family disharmony.
For business owners, insurance policies are an effective wealth protection mechanism, used in partnership agreement strategies to provide for funding and thereby helping to secure business continuity. Most typically, this is achieved through Buy-Sell agreement funding using appropriately owned, fully assessed amounts of the right types of insurance.
Want to know more about life insurance providing wealth protection?
Continuum Financial Planners Pty Ltd can assess your risk exposure and recommend policies that best suit your needs. Our experienced advisers operate to the mantra – ‘we listen, we understand; and we have solutions’ … to meet your needs in this regard: and we deliver personalised, professional advice that you will understand.
We can also review your current policies to ensure they continue to provide an adequate level of cover: under-insurance can have similar consequences to not having insurance protection in place at all. A review is particularly important if your financial situation or family circumstances change: which they have a habit of doing over time (debts reduce, children arrive – and eventually move on, family structures change – and even windfall gains sometimes come into the mix) – the review will identify whether the insurance policies you have are of the right type, in the right amount and held in the right names to provide the protection you anticipate.
Contact us today to arrange to meet with one of our financial advisers to discuss your needs – and if cost is a concern, you’ll be surprised how little that could prove to be! A meeting with one of our advisers can also be arranged by phoning 07-3421 3456.
(Originally posted in February 2010; it has occasionally been revised, refreshed and updated, most recently in April 2021.)