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Insurance That Doesn’t Pay

Thousands of Australians wrongly think they are adequately covered by insurance held inside their superannuation funds, or those bought directly from an insurer. Usually via TV advertisement or online, known as direct marketing.

An article in The Age newspaper on Wednesday, February 21, titled ‘Protect yourself – make sure your insurance covers you’, highlighted the pitfalls of these policies, which only become known at the most crucial time – claim time.

Although these policies can seem hassle-free to put in place, given the (usually) very limited disclosures required around lifestyle or medical history, and the ability to obtain cover without any blood tests etc. (known as deferred underwriting). In many cases, this can be problematic.

Deferred underwriting means the assessment of the insured’s eligibility for cover (in terms of health, pastimes and financial entitlement) is done at claim time, rather than on application. This essentially means, there is no certainty of a claim actually being paid.

As a result, these types of policies have a significantly higher rate of denial at claim time when compared with policies taken out under the advice of a risk professional.

There is nothing worse than thinking that one is fully insured, only to find the policy doesn’t work at claim time. For the insured and their family, the right advice may be the difference between long-term financial security and severe financial distress in the case of death or serious health event.

Learn more about our Life Insurance services.

Please note that the above is provided as general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored advice, please contact us today. One of our friendly advisers would be delighted to speak with you.

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Are You Under Insured?

Every so often we hear how Australians are under insured, and how income earners and their families experience financial hardship as a result of suffering from sickness, injury, long term disability or death. I’ve developed a quick guide to help you see if you’re at risk, and what you can do to rectify the problem.

1. Do you have insurance?

Recent statistics have shown that 83% of Australians say they have car insurance, and only 31% of those have income protection. Did you know that your income is your biggest asset?

For example, John is 35 years old, earning $80,000 per year and is married to Jane who is a stay at home mum. They have 2 young children, and have a $350,000 mortgage. Over a 15 year period (assuming a salary increase of 3.5% p.a.), John will have earnt over $1.5 million. Looking further in the future, by the time John looks to retire at age 65, he will have earned just over $4 million. How much is your car worth? How much is your house worth? Is it more than your accumulated income?

Many Australian’s don’t think twice about insuring their car or home, but struggle to see the importance of insuring themselves.

2. Where is your insurance held?

Is it held within superannuation, or is it personally owned? Many Australians have some form of insurance via their super fund, and may think that it is enough. But this is often not the case. Super funds offer various insurance benefits according to the fund design, and member eligibility criteria. The amount and type of insurance cover you have could be on a cost per unit basis, or a fixed amount depending on your age, occupation, etc. It is unlikely that the default cover offered via your super fund is appropriate for your specific circumstances.

You should be aware that there may be tax implications for holding insurance within your super fund.

Let’s go back to John. He holds $300,000 of Total & Permanent Disablement (TPD) cover inside his industry super fund, and goes to claim. Due to his age and other contributing factors, out of the total sum insured, he will need to pay almost $73,000 of tax. Leaving a payable amount of $227,000, this is not even enough to pay off his mortgage.

Another thing to keep in mind is that some super funds will decrease your insurance entitlement as you get older. So if you’re relying on the insurance in your super fund, it may not be enough to cover your needs.

3. How much is enough?

  • When calculating the required amount of Life and TPD insurance, there are a few things you will need to consider:
  • Repayment of debts
  • Funeral costs
  • A lump sum to allow for home and vehicle modifications
  • Future income expenditure. For example, costs of living, school fees, childcare, etc.
  • Allowances for tax implications

There are a number of ways to calculate your need for insurance. The best way, however, is to speak with one of our friendly Risk Advisors who can assist with some tailored recommendations.
If I were John’s adviser and he told me he didn’t have any life insurance, I would be asking him this one simple question: how will your family survive if you’re not around to provide?

Please note that the above has been provided as general advice, it has not taken into account your personal circumstances or goals. If you would like more tailored advice, please contact us today, one of our friendly advisers would love to speak with you.

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Beware of Holiday Accidents

As we head into the festive season, we must pause for thought for all of those who have tragically lost their lives or become seriously injured due to a horrific car accident. Did you know that on average, four people die and 90 are seriously injured on Australian roads every day! Those are some shocking statistics, and sadly the numbers aren’t decreasing. The three biggest contributors to these accidents are speeding, driver fatigue and alcohol and drugs.

Here are some tips to help reduce the likelihood of becoming another victim:

Speeding

We all know what we need to do here, slow down! By lowering your speed by 5km/h on urban roads or 10km/h on highways you will reduce your risk of an accident by half.

Driver fatigue

Ensure you stop every 2 hours for a rest. If you’re not in a location where you can stop for long, pull over to the side of the road and run a few laps around your car. This will get your blood pumping and your alertness up!

Try to avoid heavy meals while driving. Light snacks will keep your body satisfied while a large meal may have adverse effects on your driving ability.

Alcohol and drugs

Again, this one is very simple, don’t drink and drive. Don’t take drugs and drive. This has been pounded into us all since a very young age and yet, we are still having tragic losses because of people under the influence.

Unfortunately, all we can do is control our own actions and decisions, and not those of the other drivers on the road.

However, I do know for certain that every individual who passed away or became seriously injured, didn’t plan for their lives to change. These tragic events could happen to anyone, and it’s more than likely we know someone who has been affected by a road accident, I know I do.

Do yourself and your family a favour and contact us to make an appointment with one of our friendly Risk Advisers today. They will help to assess your need for life insurance and ensure your family is covered should something unexpected occurs.

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How To Protect The People In Your Business

Business owners are usually aware of the need to protect assets such as the business premises, plant & equipment, vehicles and stock via general insurance.  However, few owners consider the risks to the future of the business by not appropriately covering its most important asset – the people within the business!

Business owners should also contemplate the financial loss if personnel responsible for the equity, credit or ongoing revenue exit the business unexpectedly due to sickness, accident or death.

Business risk protection strategies for key personnel within a business include:

Buy/sell protection; Also known as partnership protection.  Allows shareholders in a business to insure for the value of their equity to cover death, total & permanent disability or serious medical conditions such as heart attack, cancer stroke etc.  If a partner suffers from an insurable event and exits the business, the proceeds of a claim will be paid to the disabled owner, or their family in the event of death.  The cover will ensure that the departing owner or family receive fair value for their share.  In addition to the insurance, a legally binding buy/sell agreement should be completed by the shareholders.  The buy/sell agreement or ‘business will’ provides the legal mechanism by which the shares of the deceased/disabled owner can be acquired by the surviving shareholder.  Buy/sell cover is a vital part of your business succession planning, as it ensures that the ongoing ownership and control of the business remains in the hands of the original shareholders.

Business Loan cover; In order to obtain a loan or credit facilities from a bank, business owners will need to provide guarantees, and may use business &/or personal assets to secure the debt.  The debts are usually ‘at call’ and the bank can request payment in the event of the death or incapacity of the guarantor.  By obtaining adequate cover, their guarantees/securities are protected, and the surviving business owner(s) &/or family will not have to sell off assets to clear the debt.

Revenue protection cover; Also known as key person cover. The loss of a key person due to disability or death may create costs to locate, recruit and train a replacement, and result in a loss of revenue until the new staff member is operating at the capacity of the disabled or deceased employee.  This cover will offset the replacement costs and the expected reduction of revenue until the business can recover from the loss of the key person.

Business overheads cover; Provides the replacement of the fixed operating costs of a business if the owner is unable to work due to sickness or injury. Overheads which are covered include loan repayments, rent, utilities and salary costs.

Please note that this has been prepared as general advice. It has not taken into account your personal or business circumstances, insurance needs or current coverage. If you would like to learn more about business insurance, contact one of our Risk Advisers today.

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Should You Have Trauma Insurance?

Breast Cancer has maintained its deadly position as one of the top four estimated cancer deaths for 2017. It is predicted that an average of 48 people every day will be diagnosed with this horrible disease. With the average age of the first diagnosis is at 61 years*. Although 61 years is the average, there is commonly diagnosis at much earlier ages.

However, there is some good news at last! The survival rate for breast cancer has slowly been on the incline for the last few years. Recent statistics show the five-year relative survival rate has increased from 72% (between 1984-1988) to 90% (between 2009-2013)*. It is important to note that many people live a long and happy life beyond this as well.

I could go on and on about the statistics of getting breast cancer, treatment, survival rates etc. However, what you don’t see in any statistics or research is the impact a diagnosis will have on the loved ones connected to those with the deadly disease. As a Risk Insurance Adviser, I have witnessed firsthand the devastating toll it takes on loved ones not only emotionally, but also financially.

Thankfully, you can do something about it. By taking out trauma protection, you will receive a tax-free lump sum payout on the diagnosis and treatment of breast cancer. Clients who receive the benefit may wish to use the money for a number of things, some include:

  • Paying for lumpy medical bills associated with treatment
  • Providing a lump sum to reduce level of debt
  • Living expenses so you and your spouse can take some time out of the workforce
  • Capital available to take a holiday or not return to work immediately – even if you are physically able

The last thing you want to think about while going through this trying time is money. Here at The Investment Collective, we have a dedicated Risk Insurance team to help you through every aspect of obtaining, maintaining and claiming your life insurance.

October is Breast Cancer Awareness month I feel it’s imperative to remind everyone (yes, you too fellas!) the importance of self-examinations as early detection is important for full recovery. Everyone should be familiar with the size, shape, look and feel of their breasts and underarms so that if changes occur, you can be proactive and seek advice/treatment immediately.

You will commonly hear that someone ‘felt a lump’ which lead to their diagnosis. But, there are many other symptoms or warning signs to look out for, these include; irritation or dimpling of your breast skin, redness or flaky skin in your nipple area or breast, pulling in of your nipple or pain in your nipple area and many more. I would encourage everyone to become familiar with the early warning signs and to seek medical advice if they have any concerns.

Please note this is prepared as general advice. It has not taken into account your personal circumstances, your insurance needs or current coverage. If you would like to learn more about how the above advice can be customised to your personal situation, please contact one of our experienced and knowledgeable insurance advisers today.

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Spring Clean Your Life (Insurance)!

By now, we should all know the importance of life insurance and how it plays a vital part in our family’s lives. But what you may not know, is that it is not just a set and forget type of deal. Your need for insurance will drastically change throughout the course of your life.

The following events are ‘trigger events’ which will reveal the need to review different levels of personal cover:

  • New (or pending) dependants, including children, aged parents or disabled children;
  • Recently married, divorced or separated;
  • Partner not working (responsible for children);
  • New job, occupation or business situation, e.g. establishing a partnership or shareholding in a business;
  • Redundancy or salary increase;
  • Inheritance of a bequest;
  • New, or increased debt e.g. purchase of an investment property or obtaining a business loan;
  • Positive changes in your health, e.g. you may have quit smoking, lost weight or had a medical issue level out.

While it is vital to review the levels of cover, it is just as critical to review the product itself. Insurance companies often review and/or upgrade the benefits in their policies to provide superior products to their customers.  Some of these improvements may be attributed to advances in the medical field, for example, there may be changes in the way doctors diagnose a patient’s heart attack. Or the insurance companies added benefits to the policy, for example, 20 years ago, a typical trauma policy only insured for up to four major health events. Today, some contracts can provide benefits for upwards of 40-50 events, depending on the insurer.

You also want to ensure your policy is still competitively priced. Every year when the renewal letter shows up from the insurance company, no doubt we all wince at the increase in price. Sometimes we just bite the bullet and pay, other times we start to doubt the need of insurance and decide to cancel. Insurance companies know the strain of increasing premiums can have on families so they are starting to implement incentives which enable you to receive discounts. Some of these may be in the form of multi-policy discounts (for example, a husband and wife apply at the same time), multi-cover discounts (holding life, TPD, trauma and income protection), and health and wellness programs.

At The Investment Collective, we try to schedule annual reviews with our clients to ensure their risk protection strategy continues to meet their goals and objectives. If it’s been some time since your last review, or since your cover was put in place, please contact one of our specialised Risk Advisers.

The above advice has been provided as general advice only. It has not taken into account your personal insurance needs or current coverage. It has not considered your personal information in any regard. If you would like to learn more about how the above advice can be customised to your personal situation, please contact one of our experienced and knowledgeable insurance advisers today.

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How To Protect Your Future

It has often been said that the difference between success and failure is having a plan in place.  As with many things in life, the earlier you get started on your plan, the more successful the future outcome will be.  This is particularly true with regards to building and protecting your wealth.  A vital aspect of long term financial planning regularly overlooked is the importance of obtaining adequate personal risk protection cover.

Adequate risk protection cover such as Death, Total & Permanent Disability, Trauma and Income Protection provides a foundation onto which you will build the structure for your accumulation of wealth into the future.

Now that the new financial year has ticked over again, it may be the time to ensure you have sufficient protection in place as a contingency plan for anything that may happen in the future.  A wealth protection strategy will reduce the risk of you and your family not achieving your financial goals.

Starting out in life, you may have very little in savings and debts to manage.  If a family comes along, you should also consider how you will provide for your family and clear your debts if the unexpected occurs, particularly if you rely on one income.

Taking out cover while you are young and healthy will pay off in the long run.  If you purchase cover earlier in life, you will have access to lower premiums and you are less likely to have your cover restricted due to health conditions which are more prevalent as we get older.

Relying on your default cover via your superannuation to provide comprehensive protection for your specific needs is an all too common trap which should be avoided.  You may have an automatic level of cover on joining your fund, and this will rarely provide the benefits required to pay off the average mortgage, and cover future expenses for your partner and/or kids if you die, or stop working because of an accident or illness.

A long term strategy to consider is obtaining cover under Level premiums, instead of the more popular and initially cheaper option of Stepped premiums.  Stepped premiums will increase annually based on the higher probability of you claiming as you get older.  Unfortunately, many people with stepped premium protection in their later years, have to reduce or consider cancelling their cover, due to premium increases at the time when they may need it most.

A Level premium will ‘future proof’ your wealth protection as the premium will increase annually based on CPI, rather than increasing age risk factors.  When you are older, you will be able to maintain your cover as the premium has been averaged over the life of the policy.  On face value, stepped premiums appear to be the cheaper option when you are young, but Level premiums provide the longer term security to hold your valuable cover into the future.

Remember, sometimes more is lost by inaction, rather than action.  Plan for the future today so you don’t regret your inaction tomorrow.

This advice is prepared as general advice only, not taking into account your personal objectives, financial situation or needs. Please consider the appropriateness of the advice in light of your objective, financial situation and needs before following the advice. If you would like to know more and/or to hear about whether the above advice would apply to you, please contact one of our insurance advisers today.

 

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I want to be able to help my kids financially

Can I give my kids some money?

I hear this question quite often from my clients.  There are several answers to the question.  Underlying it all is the normal parental need to be able to assist our family while they are juggling the usual expenses of home and children, from an income that doesn’t always stretch quite as far as they would like.

The first part of the question is – can I afford it, and your answer to that may be that you think you can.

The next part of the question is – are there consequences for me?

There may be – for instance if you receive a Centrelink age pension there is a limit as to how much you can gift to your children.  The current limit is $10,000 per year up to a maximum of $30,000 over a three year period.

If you are a fully self-funded retiree the consequence could be that your ability to maintain your own lifestyle in retirement is compromised, so it is a question that needs careful thought.  It is recommended that you seek advice from your advisor.

Is giving cash the best way to help?

It is debatable as to whether straight out cash gifts are really the best way to help – you can’t direct where the cash is spent, and it may not be put to its best use.  What if we paid an essential expense instead?  Examples might be to contribute to the grandchildren’s school fees or to pay the life insurance premium for your son or daughter?

Paying a life/TPD (total and permanent disablement) insurance premium for an adult child may mean the difference between them being properly insured, or having little or no life or TPD insurance.  This not only protects your child and his/her family, but it protects you too, as you may be called upon for support should your child become ill or disabled.

I would like to start an investment for my child/grandchild.

This is also an excellent way to give your family a helping hand as it is a long-term solution that will provide some passive income and capital growth in the future.

A small investment in the Capricorn Diversified Investment Fund, with distributions set to be reinvested, is one way you can achieve this, and it is even better if you add extra contributions from time to time.  By the time the newest grandchild is old enough to attend university or wants to buy a car for example, there will be a tidy little nest egg they can draw from.  You can view details of the Fund here or contact us for information and assistance.

Want to learn more about helping out your children/ grandchildren? For your free initial consultation with one of our friendly advisers, contact us today! One of our advisers would be delighted to assist you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

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Are your kids protected?

Did you know?

Heart disease in children is the leading cause of death, accounting for more than 30% of childhood deaths?  Or that 200 children under the age of 14 are diagnosed with leukemia each year, with treatment taking approximately 2 years?

What would happen if this was your child, or grandchild? Would you have adequate funds available to cover costs of hospital and treatment? Would you or your partner be able to stop work indefinitely to care for your sick child? Unfortunately for most people there would not be sufficient funds simply ‘lying around’ to eliminate the financial stress of coping with a sick child.

Thankfully, there is great news, a low cost solution that will ensure dollars are available to you when needed most – Child Trauma Protection.

Trauma Protection is designed to pay a lump sum amount in the event of a specified illness or event, for example, cancer, stroke or heart attack. It is now possible to not only ensure your health, but the health of your children.

In the event your child suffers a major illness or dies, you will receive a lump sum payment (as determined by you) to ease the financial burden and help allow for:

  • Parents to stop work and take care of the child full-time
  • Funding for medical treatment & hospital costs
  • Funding to provide for ongoing care or other objectives (e.g. family holiday)
  • How much does peace-of-mind cost?

Child Protection must be taken out in combination with trauma protection for an adult, the cost is approximately $150 per annum. Once the child is age 18, they are eligible to convert the policy to an adult policy without any health assessment.

Are you interested in gaining a better understand of protecting your children? Do you want make sure you have the right insurance to protect all of your family members? For your free initial consultation with one of our friendly advisers, contact us today! One of our advisers would be delighted to assist you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

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What Types of Insurance Do You Need?

There have been a lot of questions from clients lately about why they need all the different types of personal risk insurance; Life, Total & Permanent Disability (TPD), Trauma and Income Protection.  Each insurance covers something different and it is important to understand how all of these insurances work together.  Below I’ve detailed a brief summary about the different types of insurance and how they work together.

Life

Life insurance is pretty straightforward.  A lump sum amount will be paid out in the event of death or terminal illness.  The purpose of life cover is to pay down any debts, provide an income to your surviving spouse or children, contribute to future education expenses if you have children, and assist with funeral expenses.

Total & Permanent Disability

Total and Permanent Disablement (TPD) is payable in the event you become totally and permanently incapacitated due to sickness or injury, and it is unlikely that you will ever be able to return to work.  Again, this cover will provide a lump sum to reduce or extinguish debts, and provide an income to you and your family.  It may also help with home and car modifications following your disability and can assist with ongoing medical bills.

Trauma

Trauma cover also pays a lump sum should you be diagnosed with a serious medical condition, or if you suffer from an event covered under the contract. Trauma insurance covers a wide range of conditions such as Heart attack, Heart surgery, Cancer, Stroke and other neurological conditions, organ failure and various blood disorders.  Benefits can assist with the costs of specialist treatment and medication which are not covered via Medicare or private health cover.  Trauma protection can help with every day costs of living, and offer support financially should you or your partner need to take time off work to assist in recovery.

It is important to note that some people who suffer from a trauma event return to work before they can claim on their Income Protection policy.  Due to advances in medical technology, and less invasive treatment for many of the diseases covered via a Trauma policy, there is also a reduced likelihood of becoming totally disabled and a much higher survival rate.

Income Protection

Income Protection (IP) covers you for partial or total disability based on a waiting period and a benefit period.  If you suffer an injury or illness that leaves you unable to work for longer than your waiting period, you will be eligible to claim on your policy.  Income Protection typically provides a monthly payment whilst you are unable to work.  Your claim will continue until you are able to return to work, or you have reached the end of your benefit period.  It is important you know what your waiting and benefit periods are. The maximum entitlement for IP insurance is 75% of your taxable income, and you may also be able to cover ongoing superannuation contributions under some contracts.

As always, if you have queries or concerns about your insurance you should speak with your friendly adviser. We are here to help.

Are you interested in getting your current insurance reviewed or wanting to get the right cover for you and your family? Contact us today for your free initial consultation, one of our friendly advisers would be delighted to speak with you.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s Individual objectives, financial situation or needs.  Before acting on anything in this article you should consider if it is appropriate for you, having regard to your objectives, financial situation and needs.

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