If your family is changing, it’s time to review your insurances
14 May 2019
According to several surveys, Australia has a serious underinsurance problem, with most Australians not having enough insurance coverage to meet their needs or lifestyle, should they need to make a claim¹. While many have some kind of insurance in place alongside their super, it’s not enough to meet their needs or the needs of their dependants if their financial circumstances change – especially amongst families with children. The average life insurance policy takes care of less than a third of what a young family would require to replace the income earned by a parent².
It’s easy to not worry too much about what kind of insurance you have when you’re young and single. After all it’s likely that nobody is depending on you. Even if you have a partner, chances are they have the capacity to earn their own income. If you’re temporarily incapacitated and can’t work as a young single, it’s likely that your basic living expenses could be met by a combination of government support, savings, or insurance included with superannuation or other financial products. There is even an emerging trend of young people giving up health insurance in favour of saving up for their own medical expenses. It is also coming to take out low/no interest payment plans for big things like orthodontics³. All that changes when you’ve got young children depending on you.
Starting a family
Trying for your first baby is an exciting, but financially stressful time for most with expenses piling up quickly. If you want private obstetrics and a private hospital suite birth, you’ll need to review your health insurance over a year before you start trying. Most health insurance plans that include pregnancy and birth cover have at least a 12-month waiting period before you can make a claim.
If something were to happen to either parent, the other parent may need to take time off work to care for the new baby, or may have to pay for childcare – you will need to consider looking at the level of life insurance and income protection you have. The right insurance may help cover the loss of income, and could help ensure that the family doesn’t have to rely savings that were meant for your children's future opportunities.
The cost of raising kids often increases as they hit school age, and then again when they become teenagers. This is largely because of costs associated with private school, hobbies/sport/activities, and toys/electronics. According to a report by the National Centre for Social and Economic Modelling, even an ‘Aussie battler’ family on a low income, sending their child to public schools, will spend over $22,000 per child on education and over $53,000 per child on recreation from birth to age 18. The average family spends over $44,000 on education and over $100,000 on recreational activities. It’s a good idea to review your insurances if you want your kids to be able to continue enjoying the health and development benefits of things like after school sport and arts classes. Life insurance and income protection are the obvious starters, but you may also want to think about the relationship between school zones and home insurance. If you were thinking of enrolling your kids in a great public school around the corner, and your home happened to be damaged beyond liveability, would you be able to afford to replace it in the same (or better) school zone?
Families with older kids, still dependent
What happens when the kids are ready to leave the nest? Well, there are a few insurances that you may need to look at as your children become increasingly independent. If you want to teach your kids to drive in your car or lend them your car once they have their licence, you’ll need to make sure they’re covered as drivers. For dependent kids who live at home while they’re studying at university, check whether you can keep them included in your family health insurance plan.
If you’re soon becoming an empty nester, now is as good a time as any to think about your personal insurances. By this stage, you may have worked hard to establish a comfortable lifestyle for yourself and your spouse. Having the right insurance now could help prevent you from needing to rely on your retirement savings should something unexpected happen.
Is it time to review your insurances?
As a BUSSQ member you have access to personal financial advice on the insurance as part of your BUSSQ super account at no extra cost*. Call us on 1800 692 877.
*Personal advice is limited to BUSSQ products and is advice on insurance, investment choice, contributions and retirement. The cost of this advice is included in the BUSSQ Trustee related costs and this advice is provided by Link Advice Pty Ltd (ABN 36 105 811 836 AFSL 258145).
1. www.ricewarner.com/australias-relentless-underinsurance-gap. 2. www.canstar.com.au/home-insurance/are-you-under-insured. 3. www.smh.com.au/comment/why-you-dont-need-private-health-insurance-20160330-gnuc8u.html. Prepared by BUSS (Queensland) Pty Ltd (ABN 15 065 081 281, AFSL 237860) as Trustee for BUSSQ (BUSSQ Fund, ABN 85 571 332 201). This information is general advice only and does not take into account or consider your personal objectives, financial situation or needs. Before acting, you should review the relevant Product Disclosure Statement to ensure you have all the information about the relevant BUSSQ product and how it works and consider the appropriateness of the information to your needs or seek independent advice from a properly qualified professional. Past performance is not a reliable indicator of future performance.