Protect Your Debts: How To Keep Your Loans Secure, Rain or Shine

By Geoff Scofield, Westlawn Finance MD & CEO
30 April 2018

Borrowing money is a necessity for most people at some point in their lives. Perhaps it’s a neat amount — borrowing for a medical bill or a life occasion such as a wedding (of the century), for example. Or, most commonly, mortgages and loans for life’s big items involve signing into long term repayment agreements. In any instance it’s vital to protect your debts.

A question many people don’t frequently consider: what happens to these loans when the unexpected happens? Once you’ve found the best loan for your circumstances, it’s important to ensure that you are adequately covered to continue paying off that loan, should unforeseen life things occur. If something happens — an accident, a medical situation or any sort of trauma that changes your circumstances temporarily or for longer, it is essential to have an avenue of income to cover debts. Income protection and life insurance are two essential policies that will protect your debts and cover you and your family should anything prevent you from working or affect your income significantly.

hospital-injury

Who needs this?

It will never happen to me is a tempting yet precarious philosophy to live by. Everyone with loans and debt repayments should consider income protection and life insurance. We are three times more likely to get seriously sick or injured during our working life then we are to die, and there are many scenarios that prevent us from being at work and earning an income. Banks and lenders still need to be paid, no matter the personal circumstances. The financial consequences of falling behind on loan repayments can be devastating. A better philosophy to ensure financial — and therefore emotional —security: protect your debts.

Where to access a good policy:

  1. Income protection policies and life policies are readily available through your Super fund. This tends to be the cheaper way of doing it. Be sure to fully understand the policy and be sure that it provides the adequate levels of protection for your circumstances.
  2. Or go with an insurance company — qualified advisors at Westlawn help navigate the large market and the process of choice.

Tips to Choose Wisely

Know your policy: each income protection policy offers a specific range of benefits. They also define disability uniquely. Research and compare a range of policies so that you know the pros and cons of all and are choosing the best possible policy for you.

Choose the Maximum Benefits: Go for income protection that offers cover for up to 75% of your gross wages for a maximum time period —  2 years or up to the age 60 are somewhat standard. (Income protection policies may be stepped or level — understand the difference.)

Consider income protection over trauma insurance: while trauma insurance can provide great benefits in specific circumstances, most income protection covers any illness or injury.

Know your tax rights: income protection is generally tax deductible, unlike other risk insurance. This makes the cost of premiums significantly less than the original quotes state.

Seek the advice of a Westlawn Finance Specialist and protect your debts today. Call 1300 WESTLAWN (1300 937 852).

Sources:

www.moneysmart.gov.au/insurance/life-insurance/income-protection