More than 45,000 Australian couples divorce each year, and almost half of those divorces involve children under the age of 18. Thousands of de facto relationships will also come to an end. Regardless of the type of relationship, it is a time of great emotional stress.
This stress is intensified by the need to negotiate financial settlements, and with the focus on immediate needs such as funding new living arrangements and paying day-to-day expenses, it can be difficult to think about less pressing financial issues, such as insurance. There are, however, good reasons why personal insurances should be attended to as early as possible.
Ask for support
First of all, ask for support. Stress and good decision-making rarely go hand in hand. If you have a trusted friend or family member who can help you take an objective view of your situation, ask for their help and support through the process.
Early on, take professional advice. A financial planner can guide you through many of the financial aspects of divorce, including insurance. It is crucial that you and your loved ones remain properly covered at all times.
Check who is listed as the beneficiaries on your current life insurance policies. Don’t forget to check if you have life insurance via your superannuation fund. Change your nominated beneficiaries if necessary. One option is to direct that any death benefit be paid to your estate. It will then be dealt with under your Will. That said remember to update your Will, too.
Check your priorities
If you are of working age your most valuable asset is likely to be your ability to earn an income. Safeguarding this via income protection insurance should be a high priority.
If you have financial dependents (usually children) life insurance should also be a high priority. This pays a lump sum upon death that can be used to pay off debts and provide for future living expenses. If, post-divorce, you don’t have any dependents, you may not need this type of cover.
Total and permanent disability insurance pays a lump sum if you meet the policy definition of being totally and permanently disabled. It should be considered, whether or not you have dependents. It is often bundled with life insurance.
The other personal insurance to consider is trauma insurance. This pays a lump sum if you develop one of the medical conditions specified in the policy. It is designed to help with medical and recovery costs.
Strike a balance
While insurance premiums add to the financial stresses associated with relationship breakdown, the consequences of not being properly insured don’t bear thinking about. Your adviser can help you work out a balance between effective cover and affordability.
Knowing you have the right insurance in place to protect yourself and your dependents means there’s one less thing to worry about, so insurance should be dealt with in the early days of divorce or separation. If you have questions, a financial adviser from Robertson Scannell can guide you through.