Melanie Wegener

Murphy’s law suggests that if we have insurance, we probably won’t need to use it. It seems like we spend all of that money and never need to use it. That is a good thing though. We don’t want to get caught out. We don’t want to be underinsured or not insured at all.

We are often good at insuring our cars, house and contents, holidays and our health. It’s what is expected of us. It is a habit.

What about protecting you in case of an accident, serious illness, disability or death? It’s not nice to think about. It’s not a nice subject. We don’t normally talk about it. It’s not a great conversation starter (in my opinion anyway). It’s depressing and boring and not at the forefront of our minds.

However, what if something happened to you, today? What if you were no longer able to go to work and provide for your family? Who would get your assets? Who would care for your children? How would the rent or mortgage be paid? How would you afford school fees? How would the bills be paid?

Here are four simple ways to protect your family:

1. Create a will.

Many people do not have a will in place. It is not something people talk about nor something that we think about. Not having a will can make things very challenging for those that are left behind in the case of an untimely or unexpected death.

Dividing assets can become complicated, as can the guardianship of orphaned children. We did this at our local lawyers office. We put in place plans for our money and care of our children if something were to happen to us. We also put plans in writing to protect our spouse if they were widowed.

Regardless of age, it’s a good thing to sort out sooner rather than later as we really don’t know what’s around the corner. It cost less than $500 for peace of mind and was a very straight forward process. Willpro offer an online alternative. It’s completely legit and done by a lawyer for only $99 and couples less than $200 (moneysavvymamma readers get a discount when you mention my name).

2. Have an emergency fund.

Having money aside for when you need it is important. For many people, if they had a large expense pop up they would not have the funds to cover it. They are forced to ask for help from family, take our a loan or open a credit card. It’s not ideal and can prove quite stressful.

Ideally, it is a good idea to save up between 3-6 months of expenses. This money should be easily accessible, ie not in shares or in a term deposit. Consider if you were to lose your job tomorrow or be unable to work due to illness. Would you have any leave you could use or cash out? How much in savings do you have to cover rent or the mortgage? How long could you ‘survive’ until things got really bad?

This emergency fund does not have to equate to months of income, but rather necessary expenses you would have to cover (housing, groceries, utilities, car running costs, insurance etc). It can be a daunting process, especially if you are on a low wage. Start putting money aside each pay and set a goal to achieve this by.

3. Make sure you have income protection.

Income protection ensures that if you are unable to work, you will still continue to get paid. This could be for a sudden illness, accident, injury or disability. Knowing that you will be ok and your bills will be taken care of can be a huge weight off your mind.

When choosing what type and how much to sign up for, there is normally a waiting period. This is when it is imperative to have an emergency fund in place to help cover you in the interim. Income protection can be setup through superannuation (Australia’s version of retirement) or purchased separately.

Going through super can be an easier and cheaper option, but doesn’t always cover that much. Make sure to read the fine print to check that you’ll be covered enough. Applying separately can involve much paperwork, cost a higher amount and come out of your take home pay. However, if you need to access money, it might pay out more. Do your research and don’t be afraid to ask an expert for help.

4. Apply for death and total and permanent disability insurance (TPD).

Whilst we don’t ever want to access this type of insurance, it is extremely important. In the unlikely event of your early death, this can provide some comfort to your family members knowing that some key financial areas will be taken care of.

I suggest increasing the payout figure to a number that would easily pay for a funeral, pay off the mortgage, and provide enough money so the remaining spouse can stay home with the kids (and not have to worry about work). It is another insurance that you have to pay for (directly or indirectly) but it is one that you need to have in place. It is crucial that both spouses have this cover, not just the one heading out to work.

These four things are a starting point to give you peace of mind, especially during these uncertain times. It is worth taking some time to consider these questions. If not now, block out some time in your calendar or put a reminder in your phone. Make thinking about, talking about and actioning this a priority.

As always, make sure you get the right advice that is specific to your financial and family situation.

Do you need to organise one of these?

[Disclaimer: I’m not trained in finance so don’t take it from me. Feel free to grab ideas from this post but always see a professional for advice that is relevant and personal to your situation.]