RSM Australia

The Gift of Insurance

While many people intend to leave assets to their kids when they pass on, there is an increasing trend for parents to assist their adult children whilst they are still alive.

An example of an early inheritance can be in the form of a deposit to assist with the purchase of real estate.

Parents who are approaching, or have entered retirement, may have crunched all the numbers and feel comfortable with the level of capital they have available for their future

As a result, they then decide to assist their children financially, like in the example above, so they can enjoy seeing the benefits of assisting family whilst also enjoying retirement.

Then the unexpected occurs. Their adult child suffers a major health catastrophe, such as an accident or illness, and as a result the nature of the disability severely reduces the child’s ability to earn an income in the future.

At such a time, the emotional cost is impossible to quantify however the financial cost quickly becomes apparent.

Day to day living costs, loan repayments, education costs and on-going medical costs to name a few, would all need to be met. Life goes on so how are these costs going to be met?



Under-insurance is very common in Australia with many people reliant only on the insurance that may have been established via their employer’s superannuation arrangements.

In many cases, the level of cover is insufficient as the adult child’s circumstances have changed over time (e.g debt, starting a family of their own).

Or worse, unknown to the parents, the child has intentionally decided to rely on their parents as a financial backstop.

Are your parents your insurance policy? >>

The ability to earn an income is everyone’s greatest asset, and assisting an adult child to protect this provides peace of mind to everyone, especially where long-term disability or premature death are involved


Although the gift of cash or a home deposit can provide a very immediate tangible benefit to an adult child and their family, it can be temporary if protection is not in place.

Helping an adult child ensure that their lifestyle is fully protected can be one of the most precious gifts that kicks in right when it’s needed the most.

The other benefit of this type of gift is that it can be easily funded from cash flow rather than a parent’s retirement capital.

This means it can be budgeted for and it can be passed to the child on a parent’s passing, or when the child becomes more financial viable i.e. the child basically takes over the payment of the premiums.

In addition, the gift of insurance also acts as a protection to a parent’s retirement ensuring that if an adult child suffers a serious health event or worse, it won’t negatively impact retirement nest egg because it’s been protected by outsourcing the risk to an insurer.

This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282.

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.

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