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by Lauren Samsely - DFP
& Adam Ghanem - ADFP
YOUR INSURANCE SURVIVAL GUIDE
PROTECTING WHAT MATTERS MOST- YOUR FAMILY, ASSETS & INCOME
concise tips, facts and questions to help you get it rightP L U S20
2
YOUR INSURANCE survival guide
If something happened to you and you
were unable to work, would you have
enough money set aside to cover your day-
to-day bills, and to look after the people
who rely on you? It’s estimated that one in
three Australians will be unable to work due
to illness or injury for a three-month period
or longer during their career. Despite this,
many of us put insurance off, believing we
may never need it.
This guide will give you a clearer picture of the
risks, how insurance works, the different
options available, and how to avoid common
mistakes.
3
Insurance is one of those areas where our beliefs may
be at odds with actual statistics, especially if we don’t
personally know someone who has been affected. But
the fact is that life doesn’t always turn out the way we
plan. Illness and accidents are a reality and can leave you
unable to work.
We all understand how much of a nightmare it could be
if our home flooded and we didn’t have house insurance,
or if we crashed into the back of a Mercedes and didn’t
have car insurance. But surprisingly, many of us are less
prepared when it comes to insuring our lives.
In Australia, we’re more likely to insure our possessions than ourselves:
facts vs assumptions
89% 87% 14% 6% 5% 2.5%have
Total & Permanent Disability Insurance
have Income
Protection
have Life
Insurance
have Home
Contents Insurance
have Motor Vehicle
Insurance
have Trauma
Insurance
4
Average cost of heart valve surgery
Average cost for someone living with Parkinson’s
disease for 12 years
Average cost of spinal surgery
(including rehabilitation)
$105,467 $144,000$51,484
Some of us feel the insurance cover inside our superannuation is adequate, but it only
represents 20% of the cover required. To put this into perspective, take a look at the
financial implications of injuries and healthcare in Australia:w Personal insurance products
• 131heartattacksarereportedeveryday,or
one heart attack every 11 minutes.
• In2009,thenumberofdeathscaused
by a heart attack ws the same for males
and females. Therefore, a female is just as
likely to die from a heart attack as a male.
•1 in 2 Australians will be diagnosed with
cancer by the age of 85.
•Morethan60%ofcancerpatients
will survive more than five years after
diagnosis.
•Thesurvivalrateformanycommon
cancers has increased by 30% in the past
two decades.
Source: http://www.heartattackfacts.org.au/heart-attack-facts/http://www.cancer.org.au/aboutcancer/FactsFigures.htm
FAST FACTS
5
personal insurance products
As you may be aware, there are
numerous personal insurance products.
These include:
LIFE INSURANCE
Provides a lump sum to your beneficiary in
the event of your death to cover things like
mortgages, debt and replacement income.
TOTAL & PERMANENT DISABILITY (TPD)
INSURANCE
Provides a lump sum in the event that you
become permanently disabled and never
able to work again. It’s generally there to
cover mortgages and debts, replace income
and help with alterations to your home (e.g.
wheelchair access).
There are four types of TPD payout:
1. ANY occupation: If you can’t ever
work again in your job, or in any
job for which you may be suited by
education, training or experience
2. OWN occupation: If you can’t ever
work again in your current job
3. ADL (Activities of Daily Living):
If you can’t perform at least two of
your activities of daily living (these
include bathing, dressing, toileting,
mobility and feeding)
4. Home Duties: Applies if your sole
occupation is to maintain your
family home. You are eligible if
you can’t perform all those duties
– (e.g. cleaning, cooking, laundry,
food shopping, and taking care of
dependent children)
6
INCOME PROTECTION INSURANCE
Provides a monthly benefit if you’re unable
to work due to injury or illness. You can be
covered for up to 75% of your annual income
(including super). There are many different
ways to alter your Income protection policy
to suit your budget and circumstances, but
the three main variables are:
1. Agreed or indemnity cover: Agreed
means that you lock in your income at
the time of application. Indemnity means
you’re rated on your income at the time of
claim (generally the cheaper option).
2. Waiting periods: This is how long you’re
willing to wait until you receive a payment.
The longer you’re willing to wait, the
cheaper the cover.
3. Benefit period: This is how long you
would like the claim to pay you for.
The longer the benefit period, the more
expensive the cover.
TRAUMA INSURANCE
Provides a lump sum to help cover
medical expenses if you were to suffer
a certain condition. There is a schedule
that covers around 47 conditions, and
(depending on your product) around
20 less severe conditions for which you
may receive partial payments. In general,
trauma insurance covers events such
as cancers, stroke, heart disease, or
other health events such as dementia,
Alzheimer’s, sclerosis and severe diabetes.
CHILD TRAUMA INSURANCE
Provides a lump sum to the guardian/
parent if their child were to suffer a certain
condition including death. This type of
policy can only be taken out with an
adult’s policy linked to it. The product
generally has minimal associated costs
and can give you peace of mind that you
would be able to provide your child with
the best treatment if needed.
BUSINESS EXPENSES INSURANCE
This provides a monthly benefit for self-
employed people to cover fixed expenses.
The maximum period this policy can
pay out for is one year. This can cover
expenses such as rent, electricity, leasing
costs and bank charges.
7
what do you actually need?
We’ve briefly covered the different
types of insurance. There are other
variables that determine which types may
be right for you, such as your occupation
and duties at work, your age, your current
health, your income and the cost of the
insurance. Primarily, you need to consider
what’s most important to you.
It is important that to recognize that the
most valuable asset is you! As such
insurance is an integral part of any good
financial plan and should ensure there
is appropriate protection for you, your
income, assets and family.
Example scenario:
You become ill due to what you and
your doctor believe are chronic stomach
cramps. You need to take time off work and
your Income Protection insurance kicks in,
helping to cover ongoing bills. Years later,
if those stomach cramps turn out to be
something more serious, this is where your
Trauma Insurance kicks in – to help cover
potentially expensive surgery costs. If your
ailment subsequently evolves into a Total
or Permanent Disability (TPD) and you’re
unable to return to work, TPD insurance will
help with the cost of any rehabilitation.
Primarily, you need to consider what’s most important to you.
8
When calculating your insurance needs
and assessing what is important to you, the
following questions may be useful.
• DoIhaveanydebts?Whatarethey?
• IfIweretopassawayprematurely,how
would my family cope with the mortgage?
• WouldIbeabletopaythebillsfor12
months if I were to get sick or was injured?
• Whatimpactwouldithaveifmypartner
were to fall ill, suffer an injury or die?
• WhatinsurancedoIcurrentlyhaveinmy
superannuation and what does it really
cover?
• Howmuchdomydependentsneedfor
personal necessities such as food, clothing,
transportation etc?
• HowwouldIcontinuetopayforeducation
fees and other expenses if my income
diminished or stopped suddenly?
• Whatwoulditbelikeforyourfamilyand
spouse if you passed away (or were injured)
and your current cover wasn’t enough to
pay off your debts and support them. What
would they need to do to cope?
As well as choosing the most relevant
insurance cover, it’s important to
consider affordability. You should ensure
that your financial plan provides you
with adequate cover, but also allows
your superannuation fund or personal
investments to grow so that you can
achieve your retirement goals. As some
insurances can be held inside super and
some externally, it’s important to consider
your budget to fund some of these
insurances. It’s also important to find
which insurances are better funded within
super and which ones are worth paying
out of your own pocket.
Independent advice can help you to
navigate all these variables.
There are over 15 life insurance providers
in Australia and it’s not easy to find which
is right for you.
This is where an independent financial
adviser can help you find the right cover
for your financial plan.
questions to help you decide what’s important to you
Most people have different views on insurance. Some feel the need for full cover to protect
their wealth and families; others are satisfied with partial cover only. The insurance cover
in your financial plan should be tailored to your individual wants and needs. That’s why it’s
important to understand what you want and the different options available to you.
9
Life is full of choices, and today there are more than ever before. Are you falling for the
marketing hype? In the media we’re bombarded constantly with messages about quick and
easy insurance with no medicals. But generally, you’re being given a price and not advice.
There are five factors to consider when it comes to direct marketing insurance.
be wary of direct marketing insurance
1. COST
In most cases, direct cover is funded
from your own cash flow. It’s often more
expensive than an adviser-sourced
product. An adviser can work with you
and look at ways of paying for your cover
via superannuation, as well as using
linking options to reduce the total cost
to you.
2. FEATURES
Direct or industry funds generally offer basic
cover, but without many extra benefits.
Retail products tend to have a wider range
of features and built-in options that can be
tailored to your individual preferences and
budget.
10
3. NO MEDICALS
With no medicals, a direct insurer must
price higher in anticipation of the risks
associated with insuring the unknown.
Also, many direct insurers hide behind a
clause stating that ‘claims due to pre-
existing conditions are not valid’. So if
you haven’t discussed your pre-existing
conditions, you may be in trouble come
claim time. Alternatively, most products
recommended by an adviser will be
fully underwritten at application stage
(underwriting is the process of measuring
risk exposure and determining the
premium that needs to be charged to
insure that risk). This gives you peace of
mind knowing that you’re more likely to be
covered when you go to make a claim.
4. SPEED
Direct insurance offers a quicker and more
convenient process, and there are good
reasons. Consulting with a professional
adviser takes time as they aim to research
and tailor insurance to your personal needs
andsituation.Heorsheneedstocomplete
paperwork, then have an underwriter assess
your application. Direct insurance often
represents a less personalised solution.
5. GUARANTEE OF PAYOUT
Direct insurance usually offers no guarantee
that a payment will be made, as often these
policies are underwritten at the time of claim.
Retail insurance is generally underwritten up
front, which means the payout is guaranteed
providing there are no pre-existing medical
conditions that were intentionally not
disclosed to your adviser.
11
avoid common insurance mistakes
1. LOOK CAREFULLY AT YOUR
EXISTING SITUATION
Many superannuation funds arrange Life,
TPD and Income Protection cover for
their members. If you’re reviewing your
life insurance, a good place to start is
to check the cover you get within your
super fund and compare it with other
insurance options. It’s always better to
have some life insurance rather than
none, but it’s wise to know exactly what
your insurance will or won’t pay, and in
what circumstances. Ask your super fund
about the details of your insurance or let
an adviser help you with the process.
2. BE AWARE OF TAX BENEFITS
Buying insurance cover through your
superannuation fund can provide some
tax concessions that aren’t usually
available for policies held outside super.
However,youshouldneverselect
insurance based solely on tax benefits.
• Ifyoupaylifeinsurancefromyour
superannuation fund, you’ll pay only
15%taxonthefundsinyoursuperfund;
as opposed to paying life insurance
out of your pocket after incurring
your marginal tax rate (which, in most
circumstances,ishigherthan15%).
• TPDheldinsideasuperfundcanbe
a tax deduction to the fund, but TPD
held outside is not tax deductible by
anindividual.However,ifyou’repaying
your insurance as a company or a self-
employed individual, you may claim it as
a deductible business expense.
• Incomeprotectionpremiumsaretax
deductible whether inside or outside of
super.
• Traumainsuranceisnotallowedinthe
super environment and you can’t claim
tax deductions for this type of insurance.
3. SEEK INDEPENDENT ADVICE
By helping to educate and inform you,
an adviser can make it easier to prioritise,
budget, select and review insurance products.
An independent financial adviser doesn’t
work for one particular insurance company.
Instead, they recommend insurance policies
from several companies.
There are four advantages of working with an independent insurance adviser:• More choices • Lower costs• Unbiased advice • Help with claims
4. THINK IT THROUGH
When you’re looking into insurance, think
aboutwhat’simportanttoyou.Howmuch
are you willing to put aside to cover the
risk if something were to happen to you –
permanently or temporarily? If something
were to happen, would you be able to afford
the following?
• Monthly mortgage repayments • Nurse for rehabilitation• Education for your kids • Your current lifestyle
The loss of income and increased medical
costs may force you to sell the family home
and other assets, or eat into your savings.
Your hopes of giving your children the right
start may falter, or little luxuries like holidays
may become impossible. Insurance is there
to cover you for these things.
5. BE HONEST
If you’re going to take out a retail insurance
policy and go through the process of
underwriting then the main thing is to be
honest. The reason insurers ask so many
questions is to get everything out in the
open from the start, so that you’re paying
premiums for a claimable policy. If you’ve
ever seen a medical practitioner about
any condition then it will come up on
your records. It’s better to acknowledge an
ailment than to lie about it.
6. BE WARY OF DIRECTLY MARKETED
INSURANCE
As discussed above, direct marketing, TV
and internet comparison websites may
looktempting.However,shoppingbyprice
alone may result in inadequate cover and
create difficulties when it’s time for you to
make a claim. The underwriting process for
these types of insurance is done at claim
rather than when applying, this means you
could be paying premiums for cover you
are not eligible for.
Explore your options As we’ve discussed earlier, there are
several different types of insurances out
there. Understanding the characteristics
and purpose of each will help you
determine what’s most important to
you and exactly what cover you need
for total peace of mind.
13
How are we different from your average financial planner?
Future Assist is independently owned and as
such has no institutional shareholders and
no investors such as banks or investment
groups. This means we are able to offer a
wider solution which focuses purely on your
strategy rather than a handful of products. We
have offices located in all eastern seaboard
states in Australia and provide flexible
consolations either at one of our offices,
at your home or via tele-consult. Our main
objective is to educate, explore and provide
strategic advice, not sell financial plans as
a means of distributing products. We are
motivated to help you find the right strategy
for you based on your goals, your needs and
your objectives. Your goals are our focus.
All strategies developed for our clients is
reviewed by a panel of experts with over
60+yearsofcollectiveindustryexperience
between them, some of these panel members
are external to future assist and sit on our
panel to promote greater balance of advice.
We take into consideration all aspects of
your life and develop a plan that will help you
achieve your goals. We are help thousands
of Australians each year keep on track to
reach their financial and retirement goals and
provide a better lifestyle for their family.
how we can help
Future Assist provides holistic financial planning, budgeting, investment, accounting, debt
consolidation and other financial services to customers throughout Australia. We are a
privatelyownedspecialistfinancialplanningfirm,employingapproximately100staffand
encompassing 7 specialist teams. We are committed to providing ‘whole of life’ wealth
management expertise to motivated Australians.
The information provided in this article general in nature only. It should not be used as the basis of any investment decision as it has not taken any person’s personal situation, needs, wants or goals into consideration.
Future Assist Financial Service Group Pty Ltd FSL No# 413674; ABN 24 151 337 843 recommends that you seek personal advice from an authorised adviser of an Australian Financial Services Licensee before making any investment decisions.
Future Assist Financial Services Group Pty LtdAustralian Financial Services License No. 434674
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Future Assist Accountants Pty LtdAustralian Tax Agent No. 07502006
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CALL 1300 118 618 NOW TO SPEAK TO A FINANCIAL ADVISER OR VISIT FUTUREASSIST.COM.AU
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