Why it’s critical to ensure your adult children have the right insurance in place

Published on: December 6th, 2022

Underinsurance is a very real problem in Australia today, and it’s more prevalent amongst younger Australians. It’s not uncommon for people in their 20s, 30s, or even 40s to believe they are too young and/or healthy to need personal cover. However, the reality is that accident, injury, or illness can strike anyone, regardless of medical history or age.

Unfortunately, as a risk specialist, I see the true cost of underinsurance too often. It’s not just the financial implications, it’s the lifestyle ones. It’s having to sell the family home to cover lost income, move away from your support network to find affordable housing, change the children’s schools, or choose between the cost of treatment and significant financial difficulty.

If your adult children aren’t adequately insured, the above is just a snapshot of why they should be.

It can affect your financial situation too

With Australia’s housing affordability crisis continuing, the number of Australians going guarantor for their children’s mortgages is rising steadily. In fact, in a recent Mortgage Choice study, more than 53% agreed they would readily loan or gift money to their children for property purchase, and 45% said they would use the equity in their own home to do so.

While there are financial implications of the money itself, and it’s best to talk to an adviser to set up the proper structure, it’s also essential to consider what would happen if your child couldn’t service their loan.

Many people simply think about their children’s job security and reliability when going into these arrangements. But their income and life protection levels are a critical piece of the puzzle.

In the terrible circumstance that your child is unable to work due to an accident or illness, you may be left with a significant financial burden as well as the emotional one.

You may be left with the entire debt, which can have several flow-on effects. You may lose your home or not be able to retire when or as you had planned. Your credit rating may be impacted, affecting your access to loans, credit cards, or other lines of credit.

And, perhaps most importantly, it can irreparably damage family relations.

Even if you are okay with picking up the financial pieces, other family members may not feel the same way. It can (and often does) create significant family divides. These dynamics are highly emotional at any time but can be absolutely devastating when you are also navigating the injury or illness of a loved one.

Even if you haven’t gone guarantor for your children, you no doubt want the best for them and their families. Hopefully, they will never need to call upon the cover, but you cannot know what is around the corner. Helping your adult children get the right cover in place just may be one of the most important gifts you’ll ever give them.

While no one wants to think about accident, injury, or illness, it is crucial to have the discussion with those you love – and the sooner, the better.

Talk to your adviser

Your Apt Adviser can help you and your loved ones ensure they have the right cover for their circumstances, finances, and goals. Most Australians already pay for personal insurance within superannuation but don’t know what it covers. In many cases, the cover is insufficient for their lifestyle, and the right option may cost the same or even less, so it’s worthwhile having the conversation.

General Advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.