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Clients without adequate insurance are gambling with their future financial wellbeing! We sometimes hear that the ‘Under 40’s’ in Australia are a generation of non savers! While this might be true, there are many factors that the one on the blow horn tend not to think about.
We have been encouraged to save more through education, awareness, removal of axes on super, etc. And let’s face it, we are more money saavy these days than ever before. I’m constantly surprised at clients knowledge of the markets or of how particular policies work, etc. So, theoretically, you would think that we are up to speed on protecting these valuable ways to ‘create’ wealth. But it seems that we lack the ability to consider wealth ‘protection’ for our ever expanding financial literacy.
Back to the first point of Under 40’s being a generation of non savers. The problem is that Under 40’s have limited resources. They have competing demands for their income. For example, under 40’s usually have a relatively large mortgage, and spend a good portion of their income servicing it. Generally, they have young children at school, with childcare, running two cars, and possibly even a HECS debt.
So for Under 40’s, the fact of saving is not exactly high on the priorities list. The problem is, considering that this demographic is in the most important income producing part of their life and servicing the largest levels of debt in their life, it should be highest on their priorities list. But why isn’t it?
Recently, Finsia research found that almost HALF of those Under 40 recognised the need for retirement saving and insurance, but only about a third of the age group were actually doing anything about it. This is despite the fact that most people think they will be self funded retirees and won’t rely on the pension. Also relating to the ‘She’ll be right’ mentality, where people pass on contributing a small portion of income each year to cover their life, or just as important, their income!
To put this in perspective, if someone were to say “she’ll be right, I’ll go on the pension and sell the house”, which is surprisingly a common response we receive in relation to insurances such as Life and Income Protection, I would put the facts in front of them. Firstly, the pension is currently $518 per week for a single or $433 per week for a couple. Now, if you had a mortgage and were paying around $1,500 per month in repayments, that equals $346 per week! This leaves about $87 week for groceries, electricity, rates, insurance, water, car running costs, registration, etc. And the list goes on. That argument just doesn’t add up with me, especially if there is a family involved.
I believe that every good financial adviser and mortgage professional should at least inform the client of such a thing and just make them aware of how easy it is to obtain insurance, even if it is minimal. At least it will keep the wolf away from the door. I have seen all too often, the stories of families who didn’t have insurance for Life or even Income Protection, and their lives have taken a complete 180 degree turn.
For under 1% of their income, clients can be adequately covered to protect their assets in the event that something unforseen would happen.
Paul Davies
To find out more about how you can give your clients access to quality advice on income Protection and Life Insurance, contact us on either 1800 MSHIELD or email brokers@mortgageshield.com.au