Protecting the Plan: The Role of an Insurance Specialist
Most people wouldn't think twice about insuring their home or their car. The logic is pretty straightforward. If something valuable is damaged or lost, you transfer some of that financial risk to an insurer rather than carrying the entire cost yourself.
Yet we don't always apply the same thinking to our income, family and lifestyle.
For most working Australians, their ability to earn an income over the next 10, 20 or 30 years is worth considerably more than their house or car. That income pays the mortgage, supports the family, funds investments and ultimately makes a long-term wealth creation strategy possible.
Personal insurance is really just another form of risk transference. The difference is that the asset being protected is you.
What Are You Actually Protecting?
Insurance conversations have a tendency to start with products. Life Insurance, Income Protection, Total and Permanent Disability and Trauma cover.
An insurance specialist should start somewhere else. Before talking about products, we need to understand what you're actually trying to protect and what would happen financially if things didn't go to plan.
For most people, that means looking at their income, debt, family lifestyle and long-term financial objectives. For business owners, it can also extend to business debt, ownership interests, key people and succession arrangements.
The questions are practical ones. How long could the family manage if your income stopped? What happens to the mortgage if you can never work again? How much capital would your family need if you died? Could you afford to step away from work for an extended period following a serious illness without disrupting everything else you've been building?
Asking the right questions is how you get to the right answers.
Deciding What to Protect and What to Carry Yourself
The objective isn't to insure every possible risk. In many cases, that would be unnecessary and expensive.
An insurance specialist's job is to work out where the real financial exposures are, put some numbers around them and then have a conversation about which ones you're comfortable carrying yourself. From there, you can determine what is worth passing to an insurer and the most appropriate way to do it.
For example:
Someone with substantial savings may be comfortable funding the first few months away from work themselves.
A family with significant debt and young children may have very little capacity to absorb the permanent loss of an income.
Someone approaching financial independence may have accumulated enough assets that they no longer need the same level of insurance they required ten years earlier.
There isn't a formula that works for everyone. The important part is understanding the consequences and making a deliberate decision about the risks you retain rather than simply accepting them by default.
Insurance Should Be Part of Your Wealth Strategy
Personal insurance is sometimes treated as separate from wealth creation, when the two should really be considered together.
You can have a great investment strategy, maximise superannuation, manage tax effectively and build a portfolio designed to achieve financial independence over the next 20 years. Most of that planning, however, assumes that your income continues and you have the financial capacity to keep executing the strategy.
If illness or injury removes that income tomorrow, priorities can change very quickly. Savings may need to be drawn down, investments sold, super contributions stopped and long-term plans delayed while everyday expenses and debt repayments continue.
That's why we see insurance as an extension of the wealth strategy rather than a standalone product. The investment strategy is there to build wealth over time. The insurance strategy is there to help protect that progress if something outside your control interrupts the plan.
Not All Insurance Is the Same
Many Australians already have some level of Life, TPD or Income Protection insurance through their superannuation fund. That can provide useful protection, and for some people it may be all they need.
The important part is knowing what you actually have rather than assuming that having insurance means you're adequately protected.
Default and automatically provided cover can be more limited than individually assessed retail insurance, particularly when it comes to the amount of cover available, policy definitions, benefit structures and the ability to tailor cover to a person's occupation and circumstances.
A specialist can look beyond the policy you happen to already have and assess the broader market. That includes considering:
How much cover is actually required
Policy definitions and features
Waiting and benefit periods
Whether cover should sit inside or outside super
Premium structure and long-term affordability
Medical history and likely underwriting outcomes
Product selection matters because ultimately the wording of the policy determines what you're paying for and how it may respond at claim time. Price obviously matters too, but it should be considered alongside the quality and suitability of the cover rather than in isolation.
Getting Cover in Place Is Only the Beginning
One of the limitations of arranging insurance yourself, or simply relying on whatever cover sits inside super, is that there may be nobody actively checking whether it still makes sense five or ten years later.
Your financial position doesn't stand still. Income changes, mortgages reduce, families grow, businesses become more valuable and investments accumulate. The risks you need to transfer should change along with them.
An ongoing review might identify a need to increase protection after taking on more debt, adjust Income Protection as earnings change or reduce insurance later in life as accumulated wealth gives you greater capacity to carry risk yourself.
This is an important distinction. The goal of an insurance specialist shouldn't be to keep clients heavily insured forever. As your financial position strengthens, there should be risks that you can increasingly afford to take back from the insurer.
What Happens If You Actually Need to Claim?
This is the part of insurance advice that hopefully never becomes relevant, but when it does, it can be one of the most valuable parts of the relationship.
Claims can involve medical reports, financial evidence, policy definitions and ongoing communication with the insurer. At the same time, the person making the claim may be dealing with cancer, a serious accident, permanent disability or the death of someone close to them.
Having an adviser who already knows your circumstances and understands the policy means you don't have to navigate that process entirely on your own. A specialist can help coordinate the information required, deal with the insurer, explain what is happening and advocate for you as the claim progresses.
It's also where decisions made years earlier around product selection, policy definitions and how the cover was structured can become very important.
Key takeaway
We insure houses and cars because we understand the financial consequences if something happens to them. Our income and ability to provide for our family deserve the same consideration.
An insurance specialist isn't there to convince you to insure every possible risk. Their job is to understand your financial position, identify the exposures that could genuinely derail it and help you decide which risks you're comfortable carrying yourself and which ones are better passed to an insurer.
From there, it's about finding the right cover, keeping it aligned with your circumstances and being there to help if you ever need to use it.
Building wealth is important. Protecting your ability to keep building it is part of the same strategy.
Oakmont Financial Group is a specialist firm dedicated to providing Financial Advice that helps you feel confident about your future. If you would like to discuss your financial goals for the year ahead and beyond, you can book a meeting at a time that suits you (including outside standard hours) via our online calendar.
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The information contained on this website and in this blog-post is general in nature and does not take into account your personal situation or circumstance. It is recommended that you consider and use the information provided responsibly, and where appropriate, seek professional advice from a financial adviser.
Although, every effort has been made to verify the accuracy and correctness of information, Oakmont Financial Group, together with our consultants, officers, agents, and employees, disclaim all liability for any loss or damage suffered by any persons directly or indirectly relying on this information.
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