Financial discussions during divorce tend to focus on dividing assets and cash, but managing your insurance is an area which can make a big difference for you and your family.
Over 40% of Australian marriages fail, with nearly half of these involving families with young children1. While insurance protection may have been something that both parties had considered while married, it’s no less important after the relationship has ended.
Insurance is about preparing for those unexpected situations which may make it difficult to care for yourself or manage your responsibilities, whether as the main caregiver or financial provider. These situations include temporary or permanent disablement, critical illness or death. Protection can be key when you are on your own, but can also make a difference to the ongoing welfare and care of children. If you already have insurance, it can be important to reassess the level of cover you have to see if it is still adequate for your new circumstances.
Here’s four types of insurance cover you might consider taking out or reviewing, after a marriage or relationship breakdown.
- Living insurance
Living insurance (also known as trauma insurance) can provide a lump sum payment for people suffering from one of a range of specified medical events. This can be crucial to assisting with medical and accommodation expenses if you suffer from a serious illness or injury and could also help you with more flexibility with work arrangements and continued family expenses.
- Income protection
Whether you are the main caregiver or financial provider to your children, income protection can help you continue to provide stability and financial support in the event of temporary or permanent disability.
In determining your level of cover, consider the financial contribution you make for your children, and/or the cost of someone to perform childcare and household duties.
- Term life insurance
Term life insurance pays a lump sum benefit if you pass away or are diagnosed with a terminal illness. If you pass away, the benefit is paid to your nominated beneficiaries. It may be helpful to seek further advice on your beneficiary nomination. Where there are minor children involved, and you wish to ensure that there are ongoing financial provisions to cover their education, medical needs and care; you may need to allow for a testamentary trust in your will.
You could also use a Term Life payment to pay out a mortgage, so children are able to inherit and live in a property debt-free.
- Different Total and Permanent Disability (TPD) definitions for your changing circumstances
While people tend to be more aware of occupation based TPD insurance which covers a situation where you would no longer be able to work, there are also options for homemakers. A payment from this type of policy can be used to hire a professional to perform normal household duties if the homemaker is unable to as a result of permanent disability.
TPD insurance can be important in helping you manage your own needs, as well as supporting your children.
While the end of a relationship can be a stressful and difficult time for you and your family, reviewing and revising insurance cover so that it meets your new requirements can eliminate one area of concern for you – the ongoing needs of your children.
It can also be helpful to discuss financial protection with your former partner. This can provide comfort to both of you that your children will have continued security and financial support.
If you would like to determine your current insurance needs and establish what policies may be suitable for you and your family, please feel free to arrange a time to speak to me.
1Australian Institute of Family Studies – Marriage in Australia, and Divorce in Australia
This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it. This article may contain material provided by third parties derived from sources believed to be accurate at its issue date. Insurance is subject to terms and conditions, and limitations and exclusions apply. Please read the Insurance’s Product Disclosure Statement to see if this insurance is right for you.