I installed it and nothing at all was lost. You'll need to close the game down before installing; it might be an idea to pause the game as well. If you are worried, you could also back up your savegame files; they are in (My) Documents\LDW\Vitual Families on Windows, dunno about Macs. You could then restore the files in the unlikely event that there was a problem.
The only difference I noticed was that "1.00.01" now appears in the Options screen.
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To err is human; to arr is pirate.