Topic 3: How to protect yourself and the assets you worked hard to accumulate

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You’ll no doubt have experienced – at least a couple of times in your life – situations where even the best-laid plans go astray. Life can throw curveballs at all of us, at any time.

When you’ve worked hard to accumulate assets, it’s important to protect them against the unexpected – and to ensure those assets end up wherever you would like them to go once you pass away. It’s also important to protect yourself and your family against accident or illness, as well as any financial hardship that may follow if you were to pass away unexpectedly.

In this article, the first in a two-part series about protecting your assets and beneficiaries, we look at different ways of protecting your physical and financial assets, the role that various forms of insurance can play and why it’s important to review your insurance policies whenever you have a change in your circumstances.

The second article will look at a number of strategies you can put in place to protect your family and other beneficiaries after you pass away, and to ensure your final wishes related to your assets are met.

Protecting physical assets in a home safe or safety deposit box

 Often the simplest things in life can be overlooked, and one of the easiest ways of safeguarding valuable items such as wills, birth and marriage certificates, house deeds, passports, valuable jewellery and small heirlooms against fire, theft or loss, is by installing a safe in your home.

Personal safes can be purchased for as little as $100, but you’ll need to do your research as to whether they’re fire and waterproof and assess your risk accordingly. You’ll also need to consider whether you’ll bolt the safe into your floor or wall and whether it has keys or a digital pin code lock.

If you would prefer not to keep your valuables at home, you might consider storing them in a safety deposit box with you bank or financial institution. While not every bank or branch offers this service, safety deposit boxes or envelopes can provide a safe and secure place away from your home, for your valuables. They can be particularly useful if you live in areas which are prone to flood or fire.

This service typically comes at a cost, depending on the nature and size of the valuables being stored on your behalf. Speak with your bank about what sort of safety deposit boxes they can offer you.

Digitising important documents and memories 

Important documents and photos can also be scanned and saved to hard drives or online cloud services. Backing up documents to cloud storage also allows you to share them easily with your loved ones, while keeping copies in the event that anything happens to the originals.

This article has some great tips on how to declutter and digitise your life.

Review your general insurance policies

General insurance policies like home, contents and car insurance can protect your larger assets against fire, flood, theft, damage or other unexpected situations. Just remember to check your policy for any exclusions or conditions.

Some insurers, for example, offer reduced home insurance premiums for retirees who mostly spend their time at home, while others offer reduced car insurance premiums for retirees who don’t drive as much as a younger person who is commuting to work every day.

Whichever stage of life you’re in, it’s worth listing your specific insurance requirements, and reviewing your insurance policies periodically or when your life circumstances change, to ensure they’re still meeting your needs adequately. This is particularly important if you move house or downsize.

“We encourage people to go through their various policies with their insurers. If you have specific electronic equipment or collectibles for example, make sure they’re able to be protected,” BT senior financial adviser Daniella Elchaar said.

Similarly, if you have an investment property, make sure it is adequately protected. “Landlord insurance protects you and your property. Make sure the policy is reviewed regularly,” Elchaar said. “A lot of people plan to use their investment property in retirement and find that tenants have damaged it.” Insurance can help to protect your asset in this instance.

It also pays to shop around for the most suitable insurance for your needs. Comparison site finder.com.au found that some 55 per cent of Australian consumers were “paying dearly for brand loyalty”, with their ‘set and forget’ mentality when it came to everyday living costs.         

“A surprising number of Australians stay loyal to their current providers due to laziness or being scared of change – potentially costing themselves thousands of dollars a year,’ finder.com.au’s money expert Bessie Hassan said.

It’s also worth noting that lower priced policies can equate to lesser coverage and more exclusions. In reviewing your policies, check to see that you have an adequate amount of coverage at a price that represents the best value.

“Doing a ‘health check’ of your bills and outgoings is probably one of the most significant things Australians can do to improve their financial position,” Hassan said.

Re-assess your health and wellbeing insurance policies

As well as your physical assets, one of the other most important ‘assets’ you have, is your health. Like any insurance policy, it’s worth checking your current private health insurance policy to ensure you’re covered for the types of procedures you may need later in life – and to ensure you’re getting the best value for money from your insurer.

“The other types of insurance to consider are life insurance, total and permanent disability (TPD) insurance, income protection insurance and potentially, trauma insurance,” Elchaar said.

While life insurance pays out a lump sum after death, TPD insurance, for example, can protect you and your family financially, in the event that you become totally and permanently disabled at any age. Income protection insurance replaces lost income through your ability to work due to injury or sickness.

“No one plans to become ill or disabled, but it can happen to anyone at any time. Insurance can provide the money you or your family need in these critical times,” Elchaar said. “If you’re still working, your employer may already have this type of insurance for you; similarly, you may have some sort of insurance cover in your superannuation policy – it may be worth reviewing and speaking with your financial adviser.”

Elchaar explained that she had also seen instances where people did not know their spouse had taken out insurance many years earlier on their behalf, and were unaware of their entitlements when they truly needed them. In one instance, her team of financial advisers were able to assist a client who had been diagnosed with cancer, to access a TPD policy her ex-husband had set up in his name. The pay-out from the policy was able to fund her medical expenses, which would otherwise have caused her huge financial challenges at an already stressful time.

“We advise people to check their policy and get these types of insurance in place early. There are limits as to when you can take out life, TPD and income protection and trauma insurance,” Elchaar explained. “And some insurances, such as income protection insurance, will only run up to the age of 70, depending on the provider.”

While some Baby Boomers may be under-insured when it comes to critical life and health insurances, some may be over-insured and spending money unnecessarily, because many no longer have dependent children or a mortgage, and their nest eggs are large enough to cover them financially, the Herald Sun reported.

“We advise adults of any age to review their financial arrangements every couple of years or whenever there is a change in life circumstances,” Elchaar said. “Protecting yourself, your family and your assets is not really something that should be put on auto-pilot. Your protection mechanisms should change to suit your changing lifestyle and needs.”

Ensure your estate planning documents are in order

One of the final but critical steps you can take to protect your assets is to ensure your estate planning documents in place.

An estate plan includes your will and other key documents that detail how you would like your assets distributed after your death. It also includes documents which specify how you would like to be cared for medically and financially if you lose your ability to make decisions for yourself in the future.

Key documents in an estate plan may include a will, superannuation death nominees, a testamentary trust, powers of attorney and powers of guardianship, and advanced health or advanced care directives.

While many Australian’s conceptually understand the importance of having a will, studies show that at least 45 per cent of Australians do not have one.

This article provides more information about the steps you can take now, to both protect your assets and ease the burden on your family after you’re gone.

While none of us know what’s around the corner, we can take simple steps to protect against the unexpected.

Do you review your insurance policies regularly?

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Important information: The information provided on this website is of a general nature and for information purposes only. It does not take into account your objectives, financial situation or needs. It is not financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional.