The global financial and commercial impacts of the coronavirus pandemic have starkly exposed the fragility of our modern economy. Within four months of the first cases being identified in China in November 2019, most countries had entered some form of lock down, domestic and international travel had been virtually brought to a standstill and businesses around the world were laying off staff and, in many cases, collapsing.
The impacts on individuals has been significant. In Australia there has been a massive and relatively effective suite of Commonwealth and State Government stimulus and financial support packages implemented for both businesses and individuals. However, there has still been a dramatic rise in demand for charitable support for everyday Australians, for everyday needs such as groceries and clothes – this is a stark reminder that, even in a wealthy nation with the resources to support individual families, not everyone is in a position to withstand this kind of financial hardship.
Of course, the most effective way in which to withstand an economic crisis such as has been this pandemic, is to have in place a sound personal financial strategy which is aimed at securing the future of you and your family and building resilience in the face of economic downtimes.
Whether financial hardship emerges from a disease driven global recession or any other circumstances, it simply makes sense to think about and plan for the future. An essential element of any sound financial strategy is income protection insurance.
In Australia, we are quite fortunate to have in place a comprehensive superannuation structure which ensures that most working Australiansare mandatorily saving money for retirement.
Another advantage of this compulsory superannuation structure is that it incorporates automatic Death &TPD insurance for the vast majority of participants.Most Super Funds also offer an Income Protection option, although less half make it automatic.
There is, however, a serious question mark over the efficacy of group insurance policies held in superannuation funds. With such a large number of Australians recently accessing their superannuation early, and for many, clearing out their superannuation funds, in many cases that cover won’t even be in place anymore.
If you do still have your superannuation intact and you have insurance within your superannuation account, it is still the case, though, that you probably have little or no idea about whether it is really adequate to support you and your family in the event of an adverse incident that prevents you from being able to work.
If you are starting to look seriously at your long-term financial strategy, it is essential that you include in your considerations the status of your income protection insurance. To do that most effectively, it is important that you consider whether or not you have insurance in place and, if it’s in your superannuation, whether it is appropriately tailored to the specific needs of you and your family.
This year has shown us all how quickly economic circumstances can change, indiscriminately impacting the financial position of anyone with no notice. The only control you can have in circumstances like these is a sound financial strategy which must include adequate and appropriate income protection insurance.