How long could your family survive financially if you were suddenly unable to work? This week we'll continue our discussion on insurances, but focus on Total and Permanent Disability or TPD insurance. It's a topic that not everyone is interested in or enjoys discussing, but it's our belief that any sound financial plan takes into consideration a "safety net" for when it all goes wrong, and for many people, that safety net is insurance.

There are a few fundamental ideas that go hand in hand with insurances: firstly, we need to recognise that our biggest single asset is our own ability to earn an income over the timeframe of our working life. This is called our "human capital." If you stop working at age 40, either through death or disability, and you would normally be earning $80,000 per year through to age 60, your family has just missed out on 20 years of that $80,000, or $1.6M to be exact, assuming no further pay increases! This lost working capacity is the real asset that has been lost in this type of event.

The second fundamental concept to be clear on is the idea that income only comes to form one of two areas: either your "capital at work", meaning your investments working to generate an income for you, or a "person at work." If a person is not able to work to generate their own income, the only reliable fall-back position is the amount of investments you hold.

For this reason, we'd suggest an amount of TPD insurance is a prudent move for most people of working age. TPD insurance is a lump sum amount that pays out if a person is unable to work and will never be able to work again in the occupation they are trained for and experienced in. For example, if you're a truck driver and you suffer a back injury that stops you from being able to sit in your truck and drive, you would be eligible for a TPD claim.

TPD can be held either inside superannuation or outside super, and premiums vary depending on your age, smoker status, sex, and occupation. In reality, most people direct these claim amounts towards a combination of debt reduction, medical expenses and lost earnings.

We never want to imagine things going wrong, but if they do it is best to know that you are covered. Money should never add stress to your life especially when your health is in question. At Schuh Group we are passionate about providing our clients with the best opportunities in life. We take the stress out of money to ensure that you are always covered. If you'd like an obligation-free second opinion of your disability insurance position or any other concerns do not hesitate to contact us.