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Protecting Your Wealth

Protecting your wealth – Insurance in plain English

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Protecting Your Wealth

Everybody’s circumstances are different, but insurance is important for everybody. Your need for insurance will change as you move through the different stages of your life.There are many different types of insurance, and we can help you find the right level of protection for your needs.

What types of insurance are there?

There are many types of insurance.
Car or home/contents insurance allows you to insure your belongings. Personal insurance policies enable you to insure yourself and your ongoing wellbeing.
Personal insurance provides protection against sickness, injury and death, and includes:

  • Life insurance
  • Total and Permanent Disability (TPD) insurance
  • Trauma insurance, and
  • Income protection.

While insurance doesn’t remove the risk of something going wrong, it provides you and your family with protection and financial security if something does happen.
The amount of insurance you need is affected by:

  • how much you earn
  • your cost of living
  • your assets
  • your liabilities
  • your relationship status (whether you are married, in a de facto relationship or single), and how many dependants you have.

Life insurance

Life insurance protects your family by paying a lump sum if you die. Most people think that life insurance is only for the main income earner, but the person who takes care of the family is also a large contributor to the home and can be insured.

Life Insurance
Can be purchased inside or outside of superannuation Many super funds provide life insurance. Premiums can be paid from contributions made to your fund by your employer, by you personally or simply deducted from your account balance in the fund.
Tax treatment

Outside super

  • Premiums are generally
  • not tax deductible.
  • The benefit payment is tax free.
  • Broad range of potential beneficiaries.

Inside super

  • Premiums are tax deductible for the super fund.
  • The benefit payment may be taxed, depending on who receives it.
  • Limited range of potential beneficiaries.

Total and Permanent Disability insurance

TPD cover provides a lump sum payment if you suffer a disability before retirement and can’t work again, or can’t work in your usual occupation or chosen field of employment.

Total and Permanent Disability insurance
Can be purchased as an add on, or as a stand alone You can buy TPD as an add on to term life insurance, or as a stand alone product.
You can also get TPD as an extra benefit from your super fund or as part of a trauma insurance product.
Tax treatment

Outside super

  • Premiums are not tax deductible.
  • The benefit payment is tax free if paid to the injured person or their relative.

Inside super

  • Premiums are generally tax deductible for the super fund.
  • Superannuation contributions made to fund premiums may attract various tax concessions.
  • The benefit payment you receive may be taxed.

Trauma insurance

Trauma (or critical illness) insurance provides a cash lump sum if you suffer a specified illness or injury. Advances in medical treatment have increased the need for trauma insurance. The improved chance of survival means that although you are more likely to survive, you are also more likely to have substantial medical bills to pay.

Trauma Insurance
Stand alone policy or additional options Trauma insurance is usually purchased as a stand alone policy, but can be purchased with additional options, such as a TPD benefit.
Trauma insurance is generally not available through superannuation.
Cost Trauma cover is relatively more expensive than other forms of life insurance because of the greater probability of a trauma event occurring.
Tax treatment
  • Benefits are tax free.
  • There is no restriction on how you use the payments.

Income protection

Income protection insurance (also known as salary continuance or income replacement) provides a monthly payment to replace lost income if you are unable to work due to injury or sickness.

Income protection
Level of cover The maximum allowable cover is generally 75 per cent of your gross wage.
Benefit period The longer the benefit period, the higher the premium.
Can be purchased inside or outside of superannuation Income protection is available through your super fund or can be purchased as a stand alone policy outside of super.
Tax treatment
  • Premiums are generally tax deductible.
  • The payments received are considered income and are subject to tax.

 

Insurance as part of your superannuation

Life, TPD and income protection insurances are all offered within superannuation. If your insurance is held within superannuation, the cost of the premiums is withdrawn from your superannuation balance.
It is important to work out the best way to structure your insurance, whether inside or outside superannuation, or a combination of the two.

Benefits to having insurance in your superannuation may include:

  • automatic acceptance – there’s generally no need to complete medical checks
  • cheaper cover – from the bulk discount typically available to superannuation funds, and
  • tax deductibility – some contributions to superannuation attract a tax deduction, so you may be able to pay your premiums by making tax deductible super contributions.

Disadvantages of having insurance in your superannuation include:

  • limitations on the types of cover available
  • potential delays in the payment of benefits in the event of death, and
  • high tax rates – superannuation death benefits paid to a non-dependant may be taxed at up to 32 per cent.

Keep your insurance up to date

Insurance is not static, and your need for cover will change as you move through different stages in your life. As part of the financial advice process, we regularly review your insurances to make sure that you are adequately protected if your circumstances change.

 

Are your insurances up to date?

Or do you need to put something in place to better protect youself? To arrange an appointment to speak with one of our advisors call us on 02 9328 0876.

 

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.

 

Protecting you and your family

Have you got protection?

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Protecting you and your family

Every day we put ourselves at risk

All of us are exposed to dangers and threats regardless of our lifestyle and circumstances. There are many types of risk factors including those related to health, genetics, geographic location, and even our occupation has a level of risk attached to it. Unfortunately, there is no way to eliminate 100% of risks, so we have to plan for the best and prepare for the worst.

Where are you going to turn if you lose your job tomorrow? What happens if a natural disaster terrorised your family home? What if you or your partner was all of a sudden struck down with cancer? It doesn’t matter how careful you are, there are things in life you can’t control. If an unforeseen event presents itself, insurance acts a protective tool that helps safeguard the things we value most like our family, our house, valuable possessions and personal belongings. Insurance enables you to replace or repair your assets, whether those assets are your belongings or your capacity to earn income.

There are several types of protection available:

  • Life Insurance
  • Total or permanent disability (TPD)
  • Income protection
  • Trauma
  • Keyman

Everybody’s circumstances are different, but insurance is important for everybody. Sydney Financial Planning can help you find the right level of protection for your needs.

 

Are your insurances up to date?

Or do you need to put something in place to better protect youself? To arrange an appointment to speak with one of our advisors call us on 02 9328 0876.

 

General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.

Preparing for the unknown

Preparing for an unknown future

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Preparing for the unknown

Lump sum payment

Trauma insurance, also known as critical illness insurance, provides a one-off lump sum payment when an illness or condition specified in the policy is diagnosed. The money, which is tax-free, is typically paid after the insured person has survived for 14 days from the time a medical specialist confirms the diagnosis. Once the claim has been approved, the lump sum payment is made and the funds can be used to pay medical costs, upgrade treatments or to pay for private nursing, therapy or childcare assistance.

Some people use the money to pay off their mortgage or other debts to help ease financial stress during their recovery. The lump sum payment can allow a person some much-needed financial breathing space to take stock of their life.

What is covered?

Most policies cover upwards of 50 prescribed illnesses or injuries, including cancer, heart attack, stroke and paraplegia as well as other serious illnesses and injuries such as major burns and kidney failure. In contrast to trauma insurance, total and permanent disability (TPD) insurance requires you to be unable to work for a minimum of six months, and then it must be independently determined you are unable to ‘permanently’ return to your ‘own’ or ‘any’ occupation ever againi. Most trauma policies offer child cover alongside adult cover. While it may be difficult to consider one of your children being seriously ill or injured, sadly it can happen. A lump sum payment may allow parents to choose the best medical care inside or outside of Australia or give them the ability to take time off work to focus on family without worrying about the financial implications.

Know your policies

It is important not to confuse trauma insurance with income protection insurance. Instead of a lump sum, income protection insurance provides an income stream in the event you cannot work as a result of illness or injury. It provides an income while you are unable to work, replacing part of your wage or salary. For complete financial protection, both a trauma policy and an income protection policy should be considered.

 

Susie’s story

Taking out trauma insurance proved a wise decision for Susie and her husband, Paul.

Susie was diagnosed with breast cancer when she was 43 with a young family. She had surgery and then needed time to recover and to have ongoing treatment.

Her husband Paul had plenty to worry about – Susie’s illness, the children and his own work responsibilities. Fortunately Paul and Susie had each taken out trauma insurance, providing them with a $200,000 lump sum. With this money Paul could organise care for the children, ensure Susie received the best medical help available and take time off work to spend with his wife.

The Cancer Council estimates that a cancer diagnosis can on average cost a family more than $47,000 in lost productivity and out-of-pocket expenses. Life can be full of unexpected events, both good and bad. Having the right insurance in place can reduce the financial consequences of a traumatic event. We can help you determine whether your existing insurance cover will allow you to meet the challenges of an unknown future.

 

Are your insurances up to date?

Or do you need to put something in place to better protect youself? To arrange an appointment to speak with one of our advisors call us on 02 9328 0876.

 

i This depends on the definition of TPD in your policy.

General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.

How life insurance can help when buying a home

How life insurance can help when buying a home

Written by Sydney Financial Planning on . Posted in Life Insurance. No Comments on How life insurance can help when buying a home

How life insurance can help when buying a home

In the lead up to buying your first home there are many factors to take into consideration. Not only do you need to work out where you want to live and what you would like to buy but what you are able to afford. Many people will meet with a mortgage broker or bank to determine their financial position and borrowing capacity. At this point in time it is also important to consider the protections you have in place to cover the potential mortgage if you were unable to make the repayments.

Do I need life insurance to buy a house?

As with everything in life, it depends on your personal and family circumstances. Although it is not required when buying a house, life insurance often plays an extremely important role when it comes to securing your family’s future.

Regardless of whether you’re purchasing your first home, buying a new home to accommodate your growing family, purchasing an investment property or holiday home, or even downsizing as you approach retirement, buying property is a significant financial responsibility, which for most will be an ongoing mortgage commitment.

Life insurance can provide peace of mind that you have financial assistance to help cover your mortgage and the financial responsibilities that come with owning a home, whatever may happen.

Should I buy life insurance before moving into my home?

Searching for and buying a new home is a busy and emotionally-charged time.

With so much going on it can be tempting to delay purchasing life insurance until after you’re set up in your new home or have finalised arrangements around your new investment property.

But just because you’re not living in your new home or are yet to move tenants in, it doesn’t mean you’re not financially responsible for it and should consider how to ensure you’re financially protected.

If you already have life insurance in place, it is important to review your policy and ensure that it provides you with enough cover if your debt has increased. When reviewing your cover, it is worth looking at the level of cover you have in place, the waiting period, the benefit period and what you are covered for.

What is the difference between lenders’ mortgage insurance and life insurance?

You might have heard of the term lenders’ mortgage insurance (LMI) before and wondered how it differs from life insurance. The main difference is that LMI protects the lender, whereas life insurance protects the individual who holds the policy.

As it stands, generally most people need to have at least 20% of the purchase price as a deposit to avoid paying LMI when taking out a loan.”

For example, if you have less than a 20% deposit (or haven’t been accepted for the federal government’s First Home Loan Deposit Scheme), you may have to pay between $2,500 and $10,000 in LMI.

While you are responsible for paying for LMI, it’s designed to protect the lender, not you and your family.

Therefore, if you default on your loan and the sale of your property doesn’t equal the unpaid value of the mortgage, lenders can generally claim on the LMI policy to make up the shortfall.

This is vastly different from life insurance. With Life Insurance you can receive a lump sum payment which could help your family pay off the mortgage and other necessities if you were to pass away. And when coupled with other insurance products, you can help protect against accidents or illnesses that might result in you falling behind on your mortgage payments or other financial commitments. Therefore, reducing the chances of you defaulting on your payments and allowing you to keep your property.

What types of life insurance should I consider when buying a home?

There are four main types of life insurance that people buying a home generally consider, including:

Income Protection Insurance: Provides you with monthly payments of up to 75% of your monthly income to help you to continue living your life, which you may choose to put towards covering part or all of your mortgage repayments depending on your circumstances.

Life Insurance: Protects your family’s future and gives them options if you are no longer around with a lump sum payment which could be used to cover the ongoing costs and commitments that come with owning a home.
Total Permanent Disability Insurance: Gives you options to help you live a better quality of life if you are permanently disabled and can’t work. This can help ensure a disability doesn’t prevent you from covering the expenses relating to your home. It can also allow you to use this lump sum payment to make modifications to your home if this was required from your illness or injury.

Recovery Insurance: If you claim on recovery insurance, it provides you with a lump sum payment. This allows you to focus on your recovery and rehabilitation, rather than financial pressures, such as paying for your mortgage.
If you’d like to explore some options to help meet your financial goals or review your current financial measures that in place, reach out and get in contact with us.

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it you should consider its appropriateness for you, having regard to those factors.”

 

 

 

Need some help exploring your options?

Our experienced planners can review your individual sitation, get in touch, either book an appointment or contact us on 02 9328 0876.

 

General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.

 

Photo by Kelli McClintock on Unsplash

Workers compensation vs income protection

Workers compensation vs income protection

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Workers compensation vs income protection

When it comes to covering your income if you can no longer work, what’s better? Income protection, workers compensation, or both?

What’s the difference between income protection and workers compensation?

The key difference between workers compensation and income protection is whether cover will be provided and to what extent.

When it comes to workers compensation [1], cover will only be provided if the accident or illness occurs as a direct result of the job. Payments can be used to cover income for the duration that you are unfit to work or up to 65 years old in most cases (sometimes 67), as well as any medical expenses or rehabilitation. The key point when it comes to workers compensation though is where and why the injury or illness has occurred. If you cannot prove that it was a result of jobs undertaken at work, then you will not be eligible for compensation.

In contrast, Income Protection [2] can cover you for injuries and illnesses suffered both at and because of work, and also outside of work. When you consider 75% of accidents occur when a person is at home or during leisure time, compared to 25% at work [3]. Taking out income protection may help you to cover outgoings and expenses, should something occur outside of work that impacts your ability to earn an income.

Workers’ compensation costs and benefits are paid for by the employer, with workers compensation systems varying from state to state [4]. Income protection insurance premiums on the other hand are usually paid for by the individual.

What does income protection offer? You can’t make an informed decision unless you have all the facts.

Income protection can give you the support of an alternative source of income if you are unable to work due to an injury or an illness. Benefit payments of generally up to 75% of your average income are paid monthly, which can help you to cover expenses.

Remember, relying on workers compensation means you won’t be covered if the injury or illness isn’t due to work or your workplace and usually, you’ll need to present evidence to prove the injury or illness occurred as a direct result of your job. Sometimes, this may be difficult and this can result in lengthy delays. And if you’re self-employed, a sole trader or an independent contractor you may not be covered under a workers compensation scheme. While some people believe income protection is only for high income earners, this isn’t the case.

What is the impact of having both workers compensation and income protection? You can have both workers compensation and income protection. However, having access to workers compensation may mean a reduced insurance benefit [5] from your income protection policy. Why? Income protection is designed to help cover your loss of income, but if you’re already being compensated for the loss of that income from somewhere else, such as workers compensation, this will be factored in and generally your income protection benefit will be reduced accordingly.

According to the Australian Bureau of Statistics [6] 47% of Australians who suffered an injury or illness as a result of work received no financial assistance in 2017/18. While workers compensation is great, it doesn’t cover everything, especially not broken bones that prevent you from working if they occur while on holiday or even just as a result of a fall at home.

Income protection offers peace of mind, so that you and your family can be protected should your income be affected by injury or illness.

 

 

Still have some questions? Are you covered?

Speaking with one of our financial advisors is a good place to start. Make a booking or call us on 02 9328 0876 to arrange a meeting.

 

[1] Fair Work Ombudsman 2020, Workers Compensations, viewed January 2020 https://www.fairwork.gov.au/leave/workers-compensation
[2] TAL Slice of Life Blog, 2 January 2019, Income Protection Insurance: Protect against the unexpected, viewed January 2020 https://www.tal.com.au/slice-of-life-blog/ip-protect-against-the-unexpected
[3] Finder.com.au 2020, Income protection insurance vs WorkCover, viewed January 2020 https://www.finder.com.au/income-protection-vs-work-cover
[4] Nolo 2020, Who Actually Pays for Workers’ Compensation?, viewed January 2020 https://www.disabilitysecrets.com/workmans-comp-question-20.html
[5] Compare the market 2020, Do I need life insurance or income protection?, viewed January 2020 https://www.comparethemarket.com.au/life-insurance/information/life-insurance-or-income-protection/
[6] Australian Bureau of Statistics, 2018, Work-Related Injuries Australia,July 2017 to June 2018, viewed January 2020, https://www.abs.gov.au/ausstats/abs@.nsf/mf/6324.0

General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.

 

Know your life insurance

Know where you stand – know your life insurance

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Know your life insurance

Myth # 1 – Life insurance companies don’t pay claims

There’s a common perception that life insurance companies will do everything they can to avoid paying claims.
In fact, 92% of all life insurance claims are paid in the first instance¹.
As long as you fulfil your duty of disclosure when you apply for cover, and you’re covered for the medical condition you’re claiming for, you can be confident your claim will be paid.

Myth # 2 – I’m young and don’t have kids or a mortgage, so I don’t need it

Life insurance isn’t all about providing for debts and dependants. It’s also about looking after yourself.
Think what would happen if you became ill or disabled and couldn’t work. If you didn’t have income protection, you’d have to find another way to supplement your income – through friends or family. Having income protection means that you are more likely to be able to manage on your own.
There are benefits to applying for life insurance when you’re young and healthy. It’s generally cheaper and it means you don’t have to worry about getting cover later if your health changes (see myth #3).

Myth # 3 – I won’t be covered if my health changes

Once you start your cover, what you are covered under your life insurance for won’t change – even if your health declines.
In fact, you generally don’t even need to tell your insurer about a change in your health unless you intend to make a claim.

Myth # 4 – You have to do lots of medical tests to get covered

Some life insurance products sold through financial advisers require some medical tests before you get covered, but it may be as simple as one blood test and a GP examination.

  • If you have an existing medical condition, you may be asked to provide extra information about your condition and insurers will generally write to your doctor for a report rather than require tests
  • You generally won’t be covered for pre-existing conditions, so it’s important to establish upfront what those pre-existing conditions are. It’s important to answer all questions accurately upfront so any pre-existing conditions can be reviewed by your insurer for any impacts to your cover or ability to obtain cover.
  • That way you know exactly what is and isn’t covered under your policy.

Myth # 5 – Level premiums don’t go up

‘Level premiums’ are designed to save you money over the long term by eliminating the impact of age-based premium increases.

Level premiums are calculated based on your age when the cover started, not at each anniversary, which means premiums are generally averaged out over a number of years. This means your cover is more expensive than ‘stepped premiums’ at the beginning of your policy, but generally gets cheaper (relative to stepped premiums) as your policy continues.

It’s important to note that at policy anniversary the premium may still increase (even with level premiums), because age is just one factor that determines your premium. Other factors that impact premium (such as claims trends in Australian population) can result in a repricing of your insurance cover.

When insurers reprice stepped or level premiums, they don’t do it for an individual policy within a specific group unless they do it for every policy in that group.

Many life insurers in Australia have repriced level premiums in the past, so it’s important to talk to your financial adviser or your life insurer to understand your policy as well as any repricing activity that’s recently occurred, so you can make an informed decision.

myth 5

The above graph is for illustrative purposes only. This graph illustrates age-based premium increases for stepped against level for all covers. This premium comparison has been calculated, assuming all other factors affecting the premiums are excluded.
Both stepped and level premiums can increase due to factors other than age.

Myth # 6 – I’ll be stuck paying for cover I don’t need

Life insurance is designed to change as your life changes, as your cover needs can vary significantly over your lifetime.

An example may be when taking out life insurance when getting married. You may want to increase your cover if you have children or increase your mortgage. But similarly you may want to reduce your cover if your children have grown up or you’ve paid down your debts.
Your financial adviser can help you work out how much cover you need at any given time, to make sure you’re not paying for any cover you don’t need.

myth 6

Myth # 7 – The cover in my super is enough

Over 70% of Australian life insurance policies – more than 13.5 million separate policies – are held through superannuation funds*.

While this cover is great to have, many of these policies only provide the minimum level of cover employers have to offer, which isn’t enough for most people.

In fact, Rice Warner* estimates that the median level of cover in superannuation meets is only 60% of needs for life cover (or just 38% for families with children), 13% for TPD cover and 17% for income protection.[Insert Image]

myth 7

Myth # 8 – I’ll be covered by workers’ compensation

Workers’ compensation provides some protection for work-related accidents or injuries.

But it doesn’t cover most illnesses, nor does it cover anything that happens to you when you’re not at work. It’s worth checking your states workers compensation legislation.

Even if you are covered by workers compensation, the benefits are typically capped in terms of the amount and duration of payments, which means the cover could fall well short of what you really need.

Myth # 9 – Only the main breadwinner needs life insurance

There’s no doubt insuring the breadwinner is vital for any family’s financial security.

But if a non-working or lower income-earning partner became seriously ill or injured, their family would need a lot of assistance to replace their services within the home.

Imagine a breadwinner had to reduce their working hours to look after their partner or young children, or employ outside help.

Either option could prove very expensive, which is why both members of a couple should consider the various life insurance cover options available – regardless of their role.

 

Want to know more?

If you’d like to discuss any aspects covered and how it may apply to you, book an appointment with one of our planners or contact us on 02 9328 0876.

 

Article by – Canstar | © Copyright 2019 CANSTAR Pty Limited

General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.