Life Insurance and the Financial Planner
The traditional role of the financial planner has been to help clients protect and increase their wealth. However, wealth creation has often taken priority over a more basic requirement for most people – the need to protect it.
A person’s personal wealth can quickly dissappear in the instance of death, injury or illness. We all know about insuring what we consider to be the ‘big ticket’ items in our lives – houses and cars – but few people consider the need to protect what is their greatest asset – their ability to earn an income. Without that, any accumulated wealth can quickly dissappear.
This obviously can have severe financial impacts on the family and also major social security implications for the wider community. More people today live outside traditional family structures and they can be even more exposed financially, and they may not even have the support of a partner in the event of illness and the time required to rehabilitate.
Work done in 2005 indicates Australia is vastly underinsured when it comes to life insurance. Underinsurance is not just the gap between savings and debt, although that is part of the problem. In short, the underinsurance gap is the difference between a family struggling to survive in the event of death, major illness or injury, and that family being able to carry on in a financially secure environment.
In the UK, one life insurance company uses the advertising slogan:”If you had a heart attack, stroke or cancer would you rather lose your house or your mortgage?”. While this is used in relation to critical illness protection, it virtually sums up the principal reason for risk/life cover.
Financial planners have an important role in ensuring clients appreciate that protecting their wealth is just as important as growing it. The extra effort sometimes required to create and implement the right protection structure for a client brings real personal satisfaction for the adviser when health issues and claims arise. I can say this from recent personal experience.