INSIGHT

Get the right life and income insurance

August 2017

Sleep well knowing everyone you love is protected

If you want to sleep well at night it’s good to remove any niggling worries, like not having the right insurance mix to match your lifestyle.

Whether you are single or part of a family unit, there are critical points where you might need support, if life takes a turn down a more difficult path.

And inevitably, there are those moments that arrive, it might be a protracted illness or injury, or it might be something more serious.

And in those times of difficulty you want to be sure of three things – that anyone you support is well looked after, and your income and wealth are protected.

Life insurance is of course there to support those you love if you no longer can, while income and accident protection ensures your lifestyle can be maintained in difficult times.

On the surface the right insurance bundle appears to be a simple necessity of life. And yet research reveals just 27 per cent of Australians currently protect their income1, and for those who do purchase life insurance, many will be grossly underinsured2.

And the problem of underinsurance does not simply appear to be an issue of affordability - as it’s evident across all income levels.

While many families today enjoy two incomes, or can shift the level of inbound income by increasing spare work capacity, it can unravel quickly if one income is permanently removed.

In Australia the risk is amplified, as we are not great savers. According to the Reserve Bank of Australia we save just 4.7 per cent of average weekly earnings, and one-third of us with a mortgage only have a savings buffer to maintain payments of just one month.

"A good wealth accumulation strategy will also include a good wealth protection strategy"

That means the loss of an income within a family unit can have quick and devastating consequences.

So what are the road blocks to understanding the importance of life insurance?

“Income protection and life insurance premiums are generally higher than car or house premiums, which can be off-putting. But it’s because payouts on wealth protection policies are generally much higher,” says Citi head of insurance, Tim Shepard.

“Your income, investments and superannuation are generally the highest value assets for an individual or family, yet it is these assets that are least likely to be protected.

“It’s the old ‘it will never happen to me thinking’, but if something does go wrong you need to be thinking about how wide the ramifications will go.”

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If you’re wealthy do you need personal insurance?

If you are lucky enough to have high wealth, the simple answer is you have more to protect, and your situation is likely more complicated.

“For instance, if you have a sizeable investment portfolio or wealth assets, you may also have big debts associated with those assets - which unfortunately do not disappear if you are unable to work, or if you pass away,” says Shepard.

And there can also be an upside to insurance even if you don’t need to draw upon it.

“Life insurance, and accident and income protection, not only safeguard your family and lifestyle, it also adds a level of security that may help in making larger investment decisions,” says Shepard

“Managing risk is one of the essential pillars of wealth management, and having the right amount of insurance helps secure that pillar,” he says.

Essentially, insurance costs are a necessary expense on the debit side of an overall wealth accumulation plan.

But, says Shepard, no matter what you earn, if you rely on your income to pay for daily expenses, including building your asset base, you should consider protecting your income, as a good wealth accumulation strategy will also include a good wealth protection strategy.

Important Information:

Any advice is general advice only. It was prepared without taking into account your objectives, financial situation, or needs. You should consider if this advice is appropriate for your situation. We recommend you read the Product Disclosure Statement (PDS) or Terms and Conditions, available online or via a Citibank branch, in addition to seeking independent legal, financial and taxation advice on your personal circumstances before acting on the information contained in this material.

This material is for general information only. All opinions are subject to change without notice. This material is taken from sources which are believed to be accurate; however Citibank accepts no liability of any kind to any person who relies on the information in it. Investments are not deposits or other obligations of, guaranteed, or insured by Citibank N.A., Citigroup Inc., or any of their affiliates or subsidiaries, or by any local government or insurance agency, and are subject to investment risks, including the possible loss of the principal amount invested. Investments are subject to risk, including loss of income and principal. Past performance is not an indicator of future performance. Due to exchange rate fluctuations, you risk losing capital if you invest in foreign currency. Some products are not available to US persons and may not be available in all jurisdictions.