This article highlights why it is essential to consider the personal insurance needs of non-working spouses. Their role of caring for children certainly can be seen in a dollar value if children need to be put into child care.
This article also highlights that the time for the greatest need for insurance is also likely to be the time when there is the greatest pressure on the family cash flow, this is where it needs to be carefully considered what types of insurance are the highest priority and how to structure and pay for that insurance in the best manner.
I welcome anybody to contact me to discuss their situation and how their current insurance is structured, or what insurance they should consider.
Jarrod Lewis
P: 03 5559 7111
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Childcare costs ‘crucial in life cover’
Advisers have been urged to factor in childcare costs when determining how insurance can help families avoid financial shocks.
The average cost of long day-care has increased 150% in the past decade, from $30 to $75, according to the latest AMP.NATSEM Income and Wealth Report.
WealthPartners Financial Solutions partner Andrew Heaven says when addressing the gap between 75% of income cover and a family’s full costs, childcare must be considered.
“We look at reverse-engineering when talking to the client about insurance and what the operating costs of the family are,” he told Life+Health insuranceNEWS.com.au.
“For many families the budget is tight and the sudden addition of childcare costs if the non-working partner falls sick can break the budget.”
He says trauma insurance is one solution. “It’s a lump sum that helps pay debt, enabling the family to afford childcare. And people forget childcare is more expensive than private schools.”
The AMP report shows long day-care is the most common form of childcare, used by 630,000 Australian families.
But it is also the most expensive – up to $170 a day per child, more than a full-time wage for many low-income parents.
With the Government covering about 54% of childcare costs and the average annual bill for a family at $9315, most families are about $4352 out of pocket.
“One challenge facing advisers is finding the principal carer in the family cannot be insured, and how do you cover the unpaid work that can include childcare costs?” Mr Heaven said.
“Even if the principal carer is undertaking some paid work, covering childcare costs is again an issue.”
The AMP report shows 42% of mothers with children in childcare work part-time and 29% work full-time.
“When women go back to work after having children, they’re not only faced with covering the cost of childcare, but as they increase their working hours, they lose childcare benefits and pay more income tax,” the report says.
“The short-term financial gain of returning to work after having kids can be negligible, with a mother from a middle-income family taking home only $12.32 of her $30.70 hourly wage when returning to work full-time.
“Middle-income mothers will keep slightly more of their pay if they go back to work part-time – about $16.80 an hour.”
Mr Heaven says many families in the 30-50 age bracket face their highest period of costs, with large mortgages, other debts and breadwinners still developing their careers.
“It is a horrible time for these families and can become a perfect storm if something goes wrong,” he said.
Source: www.lifehealthinsurancenews.com.au