Ahhh, being financially independent is on the horizon… the lure of days with no pressing agendas, pared-back responsibilities and the ability to choose whether you’ll read the paper from start to finish now, or maybe later.

But what if you got a phone call to say that your teenage (or any age) child had suddenly become disabled. Just leaving aside the obvious emotional pain, would your financial planning allow you to financially cope? When a child becomes disabled through accident, the trauma is not just to the physical and emotional elements — it’s financial too.

It’s not a pleasant thought by any means, but if your child’s life changed suddenly through an accident, and you wanted to be by their side, or they needed to be by your side — forever — would the insurances you’ve set up allow that? Or would you be forced to keep working, when all you can think about is being with your child? Or would you give up work, but with devastating impact on your finances, hence future plans for retirement and lifestyle?

But beyond the initial daze, when things “settle down”, there’s perhaps the even more pressing issue of ongoing support. No matter how old your offspring, there is no age barrier to a disabled child returning to their parents.

Think of a child suffering spinal cord injury: there is no cure. Their care needs continue right through your working life, right through your (planned) retirement. And most likely past your death. Until their own.

They may not be able to work, so will need you to support them. How will that affect your finances — not to mention lifestyle?

This is where having the right insurance is critical: that is, the right type of insurance for you and your family, and for the right amount. In other words, you need protection strategies that are meaningful for your family.

And that also means not choosing a policy on its premium alone. Choose the policy for what it offers you. The cheapest premiums will be money down the drain if the policy doesn’t do what you need it to when you need it to do so. (You don’t insure half your car; so insuring half your life/income, etc. is nonsensical.)

Generally, people need more than one type of insurance. Here are some basics to think about:

1)     Income protection insurance will pay a pre-selected percentage of your income before the accident — for someone on home duties, for instance, this would be irrelevant.

2)     Total and permanent disability (or TPD) covers you for when an accident leaves you unable to work.

3)     Life insurance payouts go to your family if the worst happens to you. The figure is predetermined, and ideally you will have chosen it to pay out mortgages and any other debts, so your family doesn’t struggle without you. For a stay-at-home parent, this payout figure should also cover the cost of a nanny or housekeeper. (This cover is also sometime called “death cover”.)

4)     Trauma insurance pays you a lump sum when a crisis happens — this could include a stroke, some cancers, head injuries, organ transplant, paraplegia and quadriplegia (this list is not exhaustive, and, naturally, waiting periods apply with some conditions). The idea behind this one is to give you some “financial breathing space” (say if you need several months off work to recover from major surgery).

One important point to think about with trauma insurance is covering your children in your policy. It’s not uncommon for parents to fear that their child will suffer a major illness or surgery. Covering them gives you that “financial breathing space” so you can spend time by your child’s side, as you wish, during their treatment, for instance.

Other strategies to think about are arranging medical powers of attorney, estate planning using Trusts and intergenerational planning. It’s probably also quite smart to get your newly turned 18-year-old into your financial planner for their own evaluation. This will be beneficial to them — and you.

Consider also, that your now-disabled child needs treatment outside hospital: physiotherapy, massage, dieticians, chiropractors, gym/personal training… the list goes on. What will be covered?

Don’t fall into the trap of thinking Workers’ Comp will cover you in the case of an accident (and your Workers’ Comp certainly won’t cover your children’s accidents). Workers’ Comp is strictly for accidents or illnesses that directly result from your work. For males, about 70% of long-term disabilities are caused by illnesses unrelated to work; the other 30% are accident and injury related — and most of those have nothing to do with the workplace. Thinking the government will cover you? Centrelink pays a maximum disability pension of around $570 for singles — per fortnight. That’s probably not going to cover your current lifestyle. Or your child’s. Then there’s insurance in your superannuation: yes you probably have it, but check it to see it’s right for you and your family. Again, it’s money down the drain if it does not suit your needs.

Without the proper planning, you may find yourself wanting to retire “tomorrow” –– but you can’t afford it. For your family’s financial security, make sure your insurances are exactly what you and your family need. This will give you the freedom to take time off work in the case of your child having a major or disabling accident, and will cater for their ongoing care. For life.

If you have any questions on which insurances are right for you and your family, please contact us.

It’s also important for Summerhill’s insurance clients to remember that if you have an illness or an injury that needs treatment, keeps you in bed or disables you, then contact us and we’ll check it if could be a claim. We don’t expect you to remember all your policy’s (or policies’) benefits — that’s our job. It’s also our job to deal with insurance companies on your or your family’s behalf. In both cases, having your finances taken care of, means you can concentrate on the physical and emotional healing.

Tags: accident, child trauma, illness, Insurance