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Do You Know What You’re Really Covered For?

If I had a dollar for every time someone told me, “Yes, I have insurance, it’s in my super fund”, I’d be one rich lady! Whilst I’m not disagreeing that you may indeed have cover, my problem lies with the quality of cover.

Industry and retail funds are required by law to offer default insurance within your superannuation account. However, there are no rules around the benefits they offer within these policies and what most people don’t realise is they may not be covered at all.

Here are a few fun facts you should know about insurance held inside your super:

Policy indexation

Most policies within these funds decrease as you get older. They usually start tapering off at around age 40. This is usually the time when you need cover most because you have a mortgage to repay and kids to put through school. Policy indexation is important to ensure cover keeps in line with the time value of money.

Guaranteed renewability

Industry and retail fund policies are not guaranteed to renew. Most policies have a hidden clause which states that the cover can be cancelled at the decision of the trustees for any reason at any time. You could think you’re fully protected, then the unthinkable happens and you find out you weren’t protected.

Tax on benefits

Regardless of the superannuation fund, you will always pay tax on Total & Permanent Disablement (TPD) benefits. The implication of this means you may think you’re going to receive a $500,000 benefit but what you actually receive will be far less.

Underwriting on claim

When you opened your superannuation account, you are offered default cover, meaning you never have to answer a long list of personal medical questions. You may not realise there are serious implications to not doing this. Say for instance you’re diagnosed with diabetes at age 25. Then two years later you change superannuation providers and you’re offered default cover within that fund. Fast forward to another two years and you’ve had to take an extended time off work due to complications of your diabetes. You try to claim on your income protection/salary continuance only to be denied the claim. This is because two years prior to you taking out this new policy, you had already been diagnosed and this is technically a “pre-existing condition” in the eyes of the claims assessor.

There are many more reasons why you shouldn’t rely on default cover within your superannuation. To be certain you know what you’re covered for, be sure to come and see us for a full insurance review. We’ll prepare a detailed analysis of your current cover compared to other policies on the market you’ll know exactly what you’re covered for.

Please note this article provides general advice only 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 advisers would be delighted to speak with you.

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What Is Life Insurance? When Do I Need It?

Life insurance has a special part to play at various points in your life. But first, what is life insurance?

There are 4 types of insurance; there’s Life (or death), Total and Permanent Disablement (TPD), Trauma and Income Protection (IP).

Life insurance pays a lump sum amount 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.

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 cover 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.

IP covers you if you suffer an injury or illness that leaves you unable to work for longer than your waiting period.  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.  IP ensures up to 75% of your taxable income and you may also be able to cover ongoing superannuation contributions under some contracts.

In your 20s

When you’re in your 20s you have your whole life at your feet. You may or may not be debt free, and may or may not have children. Regardless of these last two points, you have your whole life ahead of you! If something was to happen to you that left you unable to work for the rest of your life and you didn’t have insurance, you would be left having to rely on family or government support. TPD and IP are a must have for people in their 20s.

In your 30s

Your 30s is when the real ‘adulting’ starts. You may start to take on some more debt like a mortgage and may start to have children. Both of which are joyous life events, however, if your partner or family are not protected should something happen to you, they could be left in a very difficult position. Life, TPD, IP and Trauma are essential in protecting your family against the unexpected.

In your 40s

Once you’ve reached your 40s the kids could be in school and taking up all your spare time with after-school activities and you’re still working towards paying off your mortgage or perhaps looking at purchasing an investment property. Again you want to make sure your family is protected. Life, TPD, IP and Trauma are essential in making sure the family home is safe and the kids are able to continue their schooling in the way you intended.

In your 50s

In your 50s the kids are becoming more independent as they start entering the workforce, your mortgage is slowly decreasing and you can start focusing on your retirement. However, all of the hard work you’ve put in over the years to build up your retirement savings could come crashing down in an instant if you were to fall ill or suffer an injury. Whilst you may not need the levels of cover you required in your 30s and 40s, you should still have Life, TPD, IP and Trauma in your suite of protection.

In your 60s

By the time you’re in your 60s, you’d expect the kids to be self-sufficient and mortgage all but paid off. You’re looking into the future to a sunny and relaxing retirement within the next few years. This is when you can start tapering off all of your insurance. It is best to seek advice at this stage (and at all stages) to see what your needs are.

Regardless of where you fall in the above categories, everyone is different therefore having a trusty Risk Adviser to step you through the process will make a world of difference.

Please note, this article provides general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial or insurance advice, please contact us today. One of our advisers would be delighted to speak with you.

Read more articles in our Financial Literacy series. 

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Mental Health is No Joke

One in five Australians aged 16-85 experience a mental illness in any year.* As the awareness of mental health conditions increases, so do the claims for life insurance. Mental health is fast becoming one of the highest claimed conditions for Income Protection and Total & Permanent Disablement. As a result of this, insurance companies are looking to put exclusions or loadings (additional premiums) on life policies for clients who have a history of this condition.

Some of my clients have expressed their concerns about mental health exclusions saying they’re a doubled edged sword. Clients feel as they’re being punished for seeking treatment from their GP but weren’t aware of the impact it would have on obtaining life insurance in the future. Keep in mind that not all mental health disclosures will be treated the same.

Case Study 1: Jess sought treatment from a psychologist when her father died. She attended six sessions as per her mental health treatment plan provided by her GP. She is now applying for cover 5 years later.

Outcome: The likelihood of Jess obtaining a mental health exclusion is slim as this would be considered a ‘life event’ and she has not received further treatment for any other mental illness conditions.

Case Study 2: Daniel experienced some anxiety at age 19 when he was attending university. Daniel spoke to his GP and was referred to a mental health treatment plan however he did not attend these sessions. At age 31 Daniel spoke to his GP again about suffering depression after receiving a redundancy at work and was again referred to a mental health treatment plan and this time he attended his sessions. Daniel is now 33 and is applying for cover.

Outcome: Due to Daniel’s history of mental illness (anxiety and depression) and given the short period since his last episode, it is likely the insurance company would apply a mental health exclusion. There may be room to renegotiate these terms in 3-5 years if Daniel’s mental health continues to stay well, however, this would be at the discretion of the insurance company.

To some, this may seem unfair but insurance companies are aware that over 50% of people diagnosed with depression may relapse into a depressive state and it is most likely to return within three years of the first episode.^

If you’ve suffered from mental health problems in the past and are looking to obtain life insurance, you should keep in mind the following:

  • Make sure you disclose all mental health issues. You have a legal obligation when applying for cover to disclose all health conditions, you would be in a far worse position if you don’t disclose this condition.
  • Know exactly what you’re covered for. If the insurance company decides to put a loading or exclusion on the policy, make sure you have a good understanding of what this means.

Above all, speak with your adviser. Advisers have the advantage of having a relationship with the insurance company’s and can, therefore, assist you in receiving the most favourable terms.

If you or anyone you know is suffering from any mental health issues, please speak to your GP or contact Lifeline on 13 11 14 or Beyond Blue on 1300 22 4636.

Please note that this article provides general advice, and has not taken into consideration your personal or financial circumstances. If you would like more tailored advice regarding life insurance or any of our financial services, please contact us today. One of our advisers would be delighted to assist you.

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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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