With years of education behind them, and years of earning potential in front of them, professional individuals are a valuable commodity. But why are so few protecting themselves – financially? You’ve worked hard to give yourself a good income. And your income is going to play a big role in your lifestyle, and that of your family, for a long time to come.
It sounds like something you’d want to protect, right? But underinsurance is an issue facing an alarming number of Australians, from all walks of life – including professionals. The insurance we’re talking about is personal insurance – the most common forms of which are death cover, total and permanent disability (TPD), trauma insurance and income protection.
Life insurance isn’t just about protecting your family financially if you die. It’s about protecting your lifestyle if you get sick or injured. So if you can’t work for a while, or ever again, you’ve got a financial back-up plan. Think of all the cases of physical and financial hardship you’ve seen in your profession. Then imagine it was your family that had to go through it all without financial support.
Protection for business owners
Many professionals are self-employed, adding another layer of financial responsibility to the equation. But despite their significant insurance needs, many small business owners are also failing to protect themselves and their families with adequate insurance. According to a recent survey by the Investment and Financial Services Council (FSC), less than half of small business owners feel they have adequate cover*.
So if they know they’re not properly covered, why aren’t they doing something about it? One of the reasons is that there’s a perception insurance is too expensive. But think about the sort of money you’d lose if you couldn’t work for a few months. Or worse, if you could never work again. It certainly helps put the cost of insurance into perspective.
It could even reduce your tax bill
Income protection insurance is one of the most relevant types of cover for professionals – including the self-employed. It can replace up to 75% of your income if you can’t work because of sickness or injury.
In the FSC survey, 95% of small business owners said they were aware of what income protection was, but 56% thought it was too expensive. So cost is obviously a big reason for the lack of protection. But the fact 47% of respondents did not know that income protection premiums were tax-deductible shows there’s a lack of understanding around how much insurance actually costs.
Business expenses insurance – which covers fixed business expenses like rent, electricity and non-income producing staff wages if you can’t work because of sickness or injury – is also tax-deductible.
So if you run a business, you can combine these two types of policies to cover your work and personal expenses. And potentially reduce your tax bill.
Get the cover you need
The best way to find out the types and amount of cover you need is to speak to a financial adviser. They can help you get the right cover, and make sure it’s structured in a way that makes it as cost-effective as possible.
This editorial provides general information only. Before making any investment decisions, we recommend you consult a financial planner to take into account your particular investment objectives, financial situation and individual needs. Southern Financial Strategies and its Authorised Representatives do not accept any liability for any errors or omissions of information
* ‘Investigating Income Protection insurance in Australia’ – FSC, July 2010.
By Steve Salvia
Steve is the CEO of Southern Financial Strategies, Accounting Focus and 10X The Business X Factor Perth Central East. A Plumber & Gas Fitter by trade and experience in the Mining & Construction industries, Steve has been a Financial Planner since 1994. He has completed his Advanced Diploma of Financial Services (Adv Dip FS(FP)), was honoured as ‘WINNER’ of the prestigious AFA Financial Adviser of the Year Award 2010 (Finalist 2009)(National Award), recognised as ‘WINNER’ AXA WA State Adviser of the Year 2010.