Andrew Kennedy, risk adviser at HLB Insurance Service, said that for most individuals, their ability to earn an income for the entirety of their working life will be their biggest source of wealth generation long-term.
He said a common oversight amongst many Australians is failing to see their working income as an asset. This can result in many losing all financial security.
“The average 30-year-old earning $100,000 a year right now can reasonably expect to earn over $6,300,000 by the time they retire,” Mr Kennedy explained.
“But while most people insure their car or home against loss or damage without a second thought, many people leave themselves completely unprotected against the accidents and illnesses that can happen to anyone.”
He highlighted that this could prove potentially devastating for individuals who find themselves unable to work, as a loss of income can impact all areas of one’s life and living conditions.
“However, if your ability to go to work and earn an income suddenly disappears, then not only is the house and car likely to disappear, but everyday living expenses – such as putting food on the table, paying your utilities and other bills, providing schooling or care for your kids – are also put at risk.”
Mr Kennedy said the most common reasons individuals may need to take out forms of life insurance range from getting married, opening or increasing a mortgage, having kids, becoming sole income families, or seeing a change in finances, such as a higher paying job or an inheritance.
He said that whilst he understands that finding the right level of life insurance, total and permanent disability (TPD), income protection (IP) and trauma cover can prove overwhelming for the individual, having the security of these insurance types can prove vital at times of financial hardship.
“If something stopped you from being able to go back to work, your financial security could be lost overnight.”
“It’s therefore important to help people understand when and why they might need to take out life or income protection insurance.”
His words come as many Australians may be set to lose their life insurance in superannuation in the near future.
On Thursday (11 January) the Productivity Commission affirmed its recommendation of mandating life insurance on inactive superannuation accounts or those with low-balances held by members under the age of 25 to be on an opt-in basis.
The recommendation, which mirrors a proposal currently circulated by the federal liberal government, has copped heat from some within the superannuation and insurance industries as potentially leaving Australians vulnerable without cover.