Think twice before cancelling insurances as you get older.


Do you know that the average person cancels their personal insurance about 1-2 years before an claimable illness strikes! The average age a person discontinues one or more of three types of living insurance policies – cover for disability, critical illness/trauma and income protection – is 45 years yet the average age for a claim is 46.5 years. (source TAL)

As mentioned in a previous blog the SMSF regulations now require Self Managed Superannuation Fund Trustees to consider Insurance as part of the SMSF Investment Strategy . TheRisk Management following applies to everyone regardless of the type of investor you are or the structure you use to save for retirement.

I see many clients in our Castle Hill and Windsor offices in their late 50’s who have cancelled their life and income protection insurances before they have come to see me. Usually they say it is because they have paid off their mortgage and are debt free so they didn’t feel they needed cover any longer.

Their focus now was on expense reduction and saving via salary sacrifice to superannuation and even some after tax contributions from savings.

While it is great to see them focus on saving for retirement and budgeting, what they don’t realise is that in cancelling insurances it is their retirement lifestyle or that of their spouse they are no longer insuring and not just their current needs.

With 5-15 years of focused savings towards a retirement nest egg they can substantially improve their lifestyle after retirement. However those dreams of a happy retirement can all be taken away with a diagnosis of cancer or a stroke that inhibits them working for a prolonged period.

You don’t just find yourself financing time off work and medical expenses but also lose out on the employer super contributions and salary sacrifice as well or worse for a small business owner, you face the expense of a getting someone to cover for you to keep the business afloat.

To realistically assess if you need to maintain your Life, Trauma or Income Protection insurance, you need to think through the worst-case scenario. If you were unable to work for 3 years due to an illness today, how would you and your loved ones cope financially?

  • Would you be able to meet ongoing living expenses like food, clothing, changing the car, pay for private health insurance premiums, etc? (this assumes mortgage paid off)
  • Would you have the liquid funds to cover additional expenses or loss in income (e.g., gap in your medical fees, time off work for your spouse to take care of you,
  • What would happen to your retirement plans and would you be able to save enough money to see the kids through the final college years or fund your retirement comfortably?
  • What if you were actually permanently disabled and they had all the costs of rearranging the home, medical care and transport options for you.

In all honesty, it is always a struggle when you lose your earning capacity. The last thing you need compounding the situation are financial concerns. Insurance helps make sure that you and the people you care about will be provided for financially, even if you’re not around to care for them yourself.

So whether you’re in retail, industry or a Self Managed Super Fund, take a moment to consider how insurance might fit into your retirement plans. We can look at ways to reduce the cover and costs to keep them affordable and provide that protection for you and your family.

If you think you may need to review your Insurances then you can contact us to offer you advice on your options. As well as offering advice on Insurances, Superannuation and SMSF’s our advisers can also offer you help in many other area’s you may be experiencing problems such as:

  • Financial Planning,
  • Tax Planning,
  • Debt Consolidation,
  • Investment Portfolios,
  • Estate Planning,
  • SMSF Trustee queries.

Have you found this blog helpful? Pass it on. Social media buttons beneath the article.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

Tel: 02 98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

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5 Comments

  1. Sounds good even i am not going to cancel my long term income protection insurance.

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  2. Great post Liam, RaboDirect’s 2012 National Savings and Debt Barometer reveals that Baby Boomers are feeling the pinch. Alarmingly 30 per cent intend to use their superannuation to pay off their mortgage, so we can see why some cancel their life insurance. It is possible to get savings plans back on track though. A formal budget is one quick and easy way to start being in control of your finances. Another is to take a look at your investment and savings products and make sure you have the most suitable ones for your situation.

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  1. Don’t depend on working longer to save for your Retirement Income | Nextgen Wealth
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