Coronavirus, Life Insurance, Income Protection and You

We're all in this together

Getting better at managing our personal and business risks in our connected world

The current Coronavirus epidemic is going to affect Australian families and businesses - but perhaps not for the reason you suspect.

Australians are not new to facing risks to manage. Communities who live in areas of risk have bushfire plans, flood plans and even snow closure emergency plans.

Read in this article

Time for a new plan

Now it's time for a fresh plan to help people keep their families safe and get through these difficult times.

• Key to sensible planning is the ability to be able to have sensible conversations about ‘what would happen if’ scenarios and honestly facing the unavoidable statistical risks we all have to face and manage.

It’s these critical conversations that are perhaps our best defense and help at getting better at managing the risk we all face.

The risks of an interconnected world

Major health epidemics and financial risks are not new to Australians.

• In 2002 when SARS (Severe Acute Respiratory Syndrome) flue across the Australian border, governments, businesses and families had to work through its effects.
• In 2007 when the GFC (Global Financial Crisis) hit, government bodies, businesses, families and individuals had to respond in different ways to manage their risks.

Today, we are currently having to manage the evolving Coronavirus (COVID-19) and prepare for its bigger impact upon our community.

The real calamity will not come from the virus directly, as such—but from all the indirect effects it will stir up.

These will begin with obvious changes like;

• Canceled domestic and international travel plans,
• Delayed product deliveries from remote manufacturing sites,
• Reduced productivity as staff self-exclude,
• Reduced retail spending as increasingly staff work from home,
• Increased public health care costs managing the unpredictable surge in medical needs while social media showcases consumers stockpiling dried food and personal materials.

The Life Insurance industry's position on the Coronavirus is …

… 'the majority of those who suffer from the virus are likely to recover relatively quickly and with no permanent consequences…'

The statistical realities we all have to face:

Thankfully, the burden of illness and death from most communicable diseases is much lower in Australia than in the developing countries of our neighbourhood.

• In an average year, up to 30,000 Australians are hospitalised and around 2,000 may die as a direct or indirect consequence of influenza.

We all have to be prepared to better manage the statistical realities of life. That’s where personal insurance products like Life Insurance and Income Protection usually form part of all our back up plans.  So, it’s worth taking a moment and doing some sensible thinking about how to better manage your risks.

The top 7 questions I’ve been asked about Coronavirus and Life Insurances

Do you want to manage your risks better?

Basic risk management for families and businesses actually both share a similar 4 step foundation.

It all starts with the question - What do you want to do about it?

Pro tip: Insurance is about compensating a person's loss if the unexpected happens - not providing a windfall if the expected happens.

When thinking about the best way to manage the normal risk of your life (and business) - ask yourself these 4 questions to explore what you are prepared (or financially able) to accept:

1. Do I want to accept the risk - when the benefits outweigh the cost?
2. Do I want to avoid the risk - especially when the risk is catastrophic?
3. Can I manage the effects of the risk - and reduce its impact by planning & diversification?
4. Should I outsource the protection against the risk - usually insure it?

How would you approach this decision about managing your risks?

Example:  Buying the latest new Smart Phone outright.

Question: What happens if I drop it or lose it?

Applying basic risk management thinking might look like this:

• Do I want to accept the risk? - I can afford to buy another phone outright asap.
• Do I want to avoid the risk - Don’t ever buy a new phone - just use pre-owned ones that have been reconditioned in case you lose them.
• Can I manage the effects of the risk, - I’ll take on the responsibility and always use a phone case, perhaps an adhesive screen protector too, and pay particular care and attention to how I treat it (and won’t let the kids play with it - especially at bath time).
• Should I outsource the protection for the risk - I’ll transfer the responsibility (and cost) for the risk and buy 'smartphone phone insurance' sufficient to repair or replace the phone if the unexpected happens and I drop it, lose it or if the family dog buries it in the garden with her favourite chew toy. (again).

Basic family risk management thinking in practice

Simply put, if the financial and emotional consequences of a situation (and yes they are linked) are too much to bear, outsource the protection of the risk to an insurance company to carry for you.

Everyday common examples include;

• A family with a home mortgage usually makes sure all the adults in the family have a life insurance policy that will, at a minimum cover the family debts in the event that one of the adults unexpectedly passes away.
• A person who depends upon their ability to continue to earn an income usually makes sure they have Income Protection in place that will, at a minimum replace as much of their income as possible if they become sick or injured and cannot work. For people with 4 weeks of employer-provided sick leave, they would have a 4 weeks waiting period on their income insurance, just to cover their bases.

As we live in an interconnected world, we all need to be aware of how to manage our risks better.

What we all can do better, today

Whether that’s learning to wash our hands better, teaching our children about the importance of hand hygiene or as employers providing our team access to free annual flu shots and health resources, it is unlikely that the world will be spared indefinitely.

Decide if;

• you want to bear the full financial responsibility of all risks yourself, or
• whether you should outsource the financial cost of your risks to an insurance company to carry for you?

It all starts with the question - What do you want to do about it?

We’d love to help you do that with confidence.

We encourage our clients, friends and supporters to get in touch as questions arise. If you’d like to see if we’re the type of people you’d like to have as part of your backup plan, Contact us today too.

Drew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses.  He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. You can connect with him on LinkedIn.  Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.