Why it's important for your entire family to be protected

You’ve saved hard to build your retirement nest egg. You should be able to spend the money on a well-earned relaxing lifestyle. But all this could be put at risk if your adult children don’t have their own financial affairs well managed, particularly adequate insurance protection.

It’s human nature to assume that bad things only happen to others. Unfortunately this approach means that many people are unprepared financially for their future if sickness, accident or injury strikes. This often results in other family members having to bear the costs of supporting them.

For those close to or in retirement who are placed in this position, the financial impact can be devastating.

Could this happen to you?

Let’s consider the example of Gary and Roslyn, both 61, who have one child, a 30-year-old daughter Karen. Gary and Roslyn are retired with an investment portfolio valued at $700,000, paying them an annual income of around $48,000. They also own their home, valued at $650,000.

Gary and Roslyn were enjoying trips away and spending time with their extended family members overseas until their lives dramatically changed when Karen was badly injured in a car accident. Karen was in hospital for almost three months, requiring another nine months of rehabilitation before she was able to return to work.

Karen’s sick leave ran out after the first fortnight, and as she had no insurance cover in place, she had no income to pay the mortgage on her apartment ($2,500 a month) or other essential costs, including her mounting medical expenses.

As they didn’t want Karen to have to sell her apartment, Gary and Roslyn needed to draw on investment capital from their portfolio to pay Karen’s mortgage and meet her expenses for the year she was off work. This ultimately reduced Gary and Roslyn’s investment portfolio by almost $70,000 (or 10%).

While Karen fortunately made a full recovery, the cost to Gary and Roslyn of supporting their daughter in her time of need meant a dramatic change in their long-term retirement prospects; ultimately their income was reduced by $7,000 per year for the rest of their lives (a 15% reduction), plus their travel plans were significantly affected.

What can you do?

Believing that unfortunate events only happen to other people isn’t a responsible solution and is a terrible way to jeopardise your retirement. As part of looking after your own financial future, make sure that others who could affect your plans, such as family members, have also taken the right steps for their own lives.

Talk openly to your adult children about their insurance cover and if they are putting themselves or you at risk, recommend they talk to a licensed adviser.