RSM Australia

Personal risk

Protecting you

Research has consistently shown that most Australians do not have sufficient wealth or insurance cover in place to protect themselves and their family’s way of life should disaster strike.

Over 5 million Australian families have dependent children, but only 4 per cent of these families possess sufficient insurance, passive income or wealth to maintain their current lifestyle for 10 years or more. Whilst having some risk protection insurance in place is important, knowing what the cover there is to protect and what other demands you may have for the protection, is vital. This is called Personal risk management and helps you understand where you are currently, what your risks are and what could potentially happen to you and / or your family should an unforeseen event occur.     

Calculating your insurable risk

The total value of your current assets minus the amount you need to continue your family’s lifestyle and is called an ‘Insurable Risk’. There is considerable more involved in calculating the two values taking into account your goals, objectives as well as estimating potential income needs for the future however, the formula below summarises the basics. 

{CURRENT ASSETS} – {$VALUE TO MAINTAIN YOUR LIFESTYLE} = INSURABLE RISK

This is often represented as a single lump sum value (i.e. $500,000) but can also be a combination of lump sum value and annual income value (i.e.$500,000 and $25,000 per annum).

‘Insurable Risk’ provides you with an estimate of what your family’s potential financial risk is to an unplanned event. The challenge is accurately estimating the {$Value to maintain your lifestyle}. This can be a complex calculation taking into account future income, future expenses, inflation and a range of other variables. Something that you should seek professional assistance with.

The insurance shortfall

The ‘insurable risk’ only provides half of the important story of your Risk Management. Subtracting the ‘insurable risk’ your existing insurances, and in some cases working out how income style insurances will impact the formula, will help to establish the most important value which is your ‘Insurance Shortfall’. 
Some families have adequate assets and insurance to protect their financial future, but a vast majority don’t. This means an Insurance Shortfall exists, and that there is potential risk to them and their families.
As a result, Australia is one of the most under insured nations in the developed world .

What should you do

Protect your most valuable assets - You and your family. 

Sadly, most Australians discover, often too late, that they have holes in the risk management plan. Their only life Insurance cover is the default amount contained within their superannuation fund. Often this is insufficient and may not always be appropriate to their circumstances.

The best course of action is to speak with your financial adviser to review your risk management plan to determine the most efficient and affordable way to ensure you have sufficient insurance to cover everything life sends your way.

Personal Financial Advice Services is provided by RSM Financial Services Australia Pty Ltd (AFSL 238282)

Everyone’s circumstances are different and this website doesn’t take into account your personal circumstance, it is therefore important that you consider the above in light of your financial situation, needs and objects, and seek financial advice before implementing a strategy.


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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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