Life has a way of surprising us, sometimes in the most challenging ways. For professionals, executives, business owners, and families who have worked hard to build financial security, the impact of illness, injury, or loss can be more than emotional, it can be financially disruptive.
That’s why personal risk insurance isn’t just a policy tucked away in a drawer. It’s a cornerstone of a thoughtful financial strategy, one that protects your income, your loved ones, and the legacy you’ve built. This article explores how tailored insurance advice can help you prepare for the unexpected, and how the right guidance can turn a moment of crisis into a foundation for resilience.
We’ll also share a real-life story that illustrates how proactive planning made all the difference for one family navigating a life-changing diagnosis.
Facing the Unexpected: Why Risk Planning Matters
It’s a belief many hold quietly, that serious illness or tragedy is something that happens to other people. Yet, every day, lives are upended by the unexpected. These are often individuals in the prime of their careers, with families to support, businesses to run, and futures carefully planned.
There’s a guiding principle worth considering insure only what you couldn’t afford to lose. That might be your income, your ability to care for those you love, or the legacy you’ve worked hard to build.
Personal risk insurance, when properly advised and structured, can protect all of that. But it’s not just about having a policy. It’s about knowing what to do when it’s needed and having the right people in place to guide the process.
Real Life, Real Impact: A Case Study in Insurance Strategy
Ben and Sally (names changed for privacy) were a successful couple in their 50s. They sought financial advice after realising their growing wealth, including an Employee Share Scheme, needed professional oversight. Initially, they hadn’t considered personal risk insurance as part of their planning.
Their adviser helped them understand the difference between generic insurance and a tailored, advised strategy. Together, they structured cover that aligned with their goals and family needs.
A few years later, Ben was diagnosed with cancer.
The adviser immediately activated claims on Ben’s income protection and trauma policies. The benefits covered medical costs and maintained the family’s lifestyle. Ben recovered and returned to work, but the cancer returned, and this time it was terminal.
The adviser reinstated Ben’s income protection benefits and began coordinating across all areas of their financial life. This included:
- Managing TPD and life insurance claims
- Structuring payments through superannuation to avoid unnecessary tax
- Splitting Sally’s concessional contributions with Ben to increase accessible funds
- Establishing a self-managed super fund (SMSF) to optimise control and flexibility and save significant tax for Sally, post Ben’s passing
- Retaining funds in one of Ben’s existing super accounts to access tax-free money under the terminal illness condition of release
- Collaborating with their lawyer to update Ben’s estate plan and protect the family’s assets
The outcome was a thoughtfully coordinated plan that not only delivered strong financial results but also provided comfort and clarity during an incredibly challenging time.
Why Conversations About Insurance Matter
Insurance is designed to protect you so that you don’t have to rely on family or loved ones for financial support. In the same way, ensuring your children are appropriately insured means you won’t need to become their financial safety net if something goes wrong for them.
Consider this: when a young adult experiences a serious illness or passes away unexpectedly, the financial consequences can ripple through the entire family, especially if they have dependants of their own. Without adequate insurance, parents may find themselves stepping in to cover medical costs, funeral expenses, or ongoing support for grandchildren.
These situations highlight the importance of having proactive conversations with your children about their insurance cover. Are they protected if they’re unable to work? Do they have trauma cover in place? What would happen financially if they were diagnosed with a serious illness or worse?
These conversations aren’t always easy, but they are essential. They’re about protecting your children and yourself from the financial fallout of life’s worst moments.
What to Do When Life Takes a Turn
When faced with a serious diagnosis or the loss of a loved one, it’s natural to feel overwhelmed. In those moments, clear thinking can be difficult, and navigating financial decisions may seem daunting. That’s why having a trusted financial adviser by your side is so important. At Stratus Financial Group, our advisers take on the role of central coordinator, working closely with accountants, legal professionals, superannuation trustees and insurers, to ensure every aspect of your financial affairs is managed with care, clarity and precision.
Making the Most of Your Insurance Benefit
Once the claims process is underway and the necessary professionals are engaged, attention naturally shifts to what comes next: making thoughtful decisions about how to use the insurance benefit. This is where financial advice becomes even more valuable, not just in securing the payout, but in helping you use it to support your family, honour your loved one’s legacy, and build a resilient financial future.
As part of this process, it’s also important to review your superannuation access options. If you’ve been diagnosed with a terminal illness or are permanently disabled, early access to your super may be available under specific conditions of release. This can offer additional financial flexibility when it’s needed most. At Stratus Financial Group, we help clients understand eligibility, navigate tax implications, and structure withdrawals in a way that supports both immediate needs and long-term goals. With the right advice, your superannuation can become a powerful component of your financial resilience strategy.
When a life insurance benefit is paid, it can feel like a lifeline in the midst of grief. But knowing how to use that benefit wisely is just as important as receiving it…
Understanding Tax and Superannuation Implications
Many people assume that death automatically triggers large tax bills. But the reality is more nuanced.
Superannuation: If paid to a spouse or minor children, super benefits are generally tax-free. But if paid to adult children, the taxable component may attract 15 percent tax and in some circumstances, additionally the Medicare levy. Strategies like withdrawal and re-contribution or SMSF structuring can help reduce this burden.
Life Insurance: Generally tax-free when paid to financial dependants. But if linked to business agreements or paid to non-dependants, tax may apply.
Investment Assets: Capital gains tax may apply if assets are sold by beneficiaries. With the right planning, this can be managed effectively.
Executive Share Schemes: These can trigger tax events upon death, especially if shares are unvested. Keeping records and planning ahead is essential.
Estate Planning: Without a clear plan, an estate could face delays, unnecessary tax and even disputes. Advisers work with legal teams to ensure wishes are honoured and families are protected.
Insurance Is the Beginning, Not the End
Having insurance in place is just the beginning. What truly makes a difference is knowing how to respond when it matters most and having the right support to guide you through it. At Stratus Financial Group, we’re here to walk with you through every stage of the process: from planning and structuring your cover, to managing claims and coordinating with your broader financial team, to ensuring your protection strategy continues to serve what matters most to you.
If you’ve been putting off this conversation, or if you’re unsure whether your cover is enough, now is the time to get advice. Please accept our invitation to give us a call to discuss your financial planning and insurance needs. Please contact Brett Cribb, Steve Nicholas, James Marshall or Debbie French at +61 (0)7 3007 2007 or email info@stratusfinancialgroup.com.au. Let’s work together to achieve your goals.
Stratus Financial Group helps professionals, executives, business owners, families and retirees manage their complex financial affairs and coordinate their professional advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.