A serious health scare can throw our life plans off course. In our later years, the chance of health concerns increases. Financial planner Paul Larkin of IT Financial Services shares his tips for being financially prepared if it does.

Be prepared

It’s human nature to think of serious illness as something that will only strike others, not you. However, when you’re planning for retirement or are already in retirement, it’s a hurdle you might need to be prepared for.

While you can never be fully prepared for the unknown, you can put a financial strategy in place to give you peace of mind and let you get on with the retirement you’ve dreamed of. As financial adviser Paul Larkin points out, a serious illness will be emotionally stressful.

“It’s important to have measures in place that will help minimise worrying about money at the same time,” he says.

Income overview

If serious or chronic illness occurs, it's helpful to have an overview of how it may affect you financially. Our Budget Planner can help you get a general understanding of your income and expenses.

Check you've got the right insurances

Larkin believes that the first port of call should generally be looking at your private health insurance, and determining the appropriateness of any coverage.

“If you have it, make sure it covers you for treatments relevant to your stage of life and not ones you’ve outgrown,” he says.

“One of the main ways to protect yourself for events like sickness and injury is through personal insurance," he adds. "It can cover you for loss of income, provide funds to support your recovery or a lump sum to fill the gap in your retirement plan.”

Larkin reiterates that it’s important you understand what policies you have and continue to review them as your life changes to ensure that they remain appropriate to your needs. He warns that “while many people have superannuation life insurance, they often aren’t really across what’s covered”.

Generally speaking, some useful questions to ask yourself when assessing your insurance needs include:

  • Do you have a partner or other dependants?
  • Do you still have a mortgage or any other personal debts or regular payments you need to make?
  • Do you still rely on working to earn some income?
  • Could you afford the extra costs incurred when recovering from illness or living with permanent diminished physical or mental capabilities?

Insurance may be a key way to protect yourself financially in the event of serious or chronic illness. Larkin points out that there are three types to consider: income, injury and critical illness insurance.

Take the money stress out of recovery

“We’re working longer – even if it’s part-time,” Larkin says.

“If you’re still building your super and assets base, income protection insurance is valuable. After all, not being able to work can put some serious holes in your retirement plan. As well as the loss of your salary, there’s the loss of super contributions, your ability to pay down your mortgage or add to other investments in your wealth creation strategy.”

Support when you need it: injury and critical illness cover

Health events can take many forms, which is why, Larkin says, it’s important to check you’re covered for different types.

“Injury cover helps pay for the support you need if your injury means you need help to look after yourself for a while, say after a hip fracture.”

"Critical illness cover gives you a lump sum benefit if you get sick from a range of serious conditions like cancer, heart attack or stroke.”

Larkin adds that many people combine both types of insurance in the one policy.

Minimise insurance costs

The downside of getting adequately covered is that insurance can be expensive, especially as you get older.

“Fortunately, there are ways to minimise costs,” Larkin reassures.

“Make sure you’re reviewing your insurance policies annually so you’re not paying for insurance you don’t need,” he says. “For example, when you stop working, stop your income protection.”

Generally speaking, he urges people to keep up their cover. “Work your way backwards and determine what you can afford, what’s manageable, so that if something terrible happens, you have some insurance in place.”

Having insurance inside your super or pension fund may also be a tax-effective way to ease the cost burden.

Working out what’s best for your individual needs can be complicated. Start by checking out what policies are available online. Talking to a financial planner could also help to ensure you have the right coverage for your particular circumstances or needs.

Get help with hardship

In the event that a serious illness, and the sudden associated increase in costs, leaves you in a difficult financial position, there are steps you can take to get you through.

“The bills in these situations can really add up,” Larkin says. “If it does put you into a position of hardship and you don’t have enough insurance or savings, you’ll need to take action.”

He urges you to get help and seek advice – and the earlier the better. We also have some general advice.

“Talk to your super fund about the possibility of accessing your funds under financial hardship provisions," Larkin says. "If you still have a mortgage, you may want to approach your bank to see if they can help.”

Through a combination of pre-planning and discussions with your insurance, super and mortgage providers – plus the support of family and friends – there are ways to reorganise your finances when a serious illness occurs.

Request a complimentary financial planning consultation

It’s a good idea to seek help to ensure you’re investing in insurance that suits you. You can talk to your financial adviser or set up an appointment with one of our financial advisers by calling 1300 558 863 (Mon-Fri, 9am-6pm AEST/ADST).

For more information, help with your questions and general advice, call MLC on 13 26 52.

Important information

This information is provided by National Australia Bank Limited ABN 12 004 937 AFSL No. 230686 (NAB), a member of the National Australia Bank Group of companies. Any advice is general in nature and has been prepared without taking into account your personal objectives, financial situation or needs and because of that you should, before acting on the advice, consider the appropriateness of the advice having regard to those matters. See the NAB Financial Services Guide for details about relationships between NAB and product issuers, and remuneration or benefits that may be received in relation to NAB’s authorised services.

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After more?

Life insurance

With NAB Essential Life insurance, you’ll receive financial support for you and your loved ones if you’re diagnosed with a terminal illness or die.

Critical illness insurance

If you suffer a critical illness, it’s good to have a backup plan so you can focus on getting better.

Injury insurance

When accidents happen, NAB Essential Injury Insurance can help cover you and your family financially while you get back on your feet.

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