disability insurance Archives

Personal risk management plan – do you have one?

28 September, 202228 September, 2022 Finance

Risk Management Plans don’t only apply to businesses – every person and family should also have a plan to help them cope in the event of an unexpected crisis. No doubt you have insured your car as the risks of damage are obvious to you on a daily basis. You will almost certainly have insured your home and contents against fire, burglary or storms. But what about your greatest asset: your income? Statistics show that as a working adult, earning an average income is worth more than $3.7 million over a 40-year full-time career, assuming no increase in earnings. How would you cope if your family’s primary income earner met with serious illness or accident? Your Risk Management Plan Professional guidance is crucial in establishing your risk management plan. You need to consider the extent of your financial commitments and review what assistance may already be in place. This may include insurance cover within your superannuation, employer protection, existing insurance policies or other sources. Fortunately, a range of insurance policies are available to cover the risks you confront. These include: Loss of Life or Total & Permanent Disablement. By including this in your superannuation it is effectively a tax deduction as your superannuation comes from pre-tax income. Income protection. A critically important cover for income earners. It will provide you with income in the event of sickness or accident for a predefined period. If you are a small business operator you can include the costs of operating your business while you are incapacitated. The premiums are a tax deduction. Trauma insurance. This is sometimes referred to as critical illness insurance and provides for a lump sum in the event of suffering a specific injury or illness. It is ideal for a non-income earning partner who may not qualify for income protection. Child Trauma insurance. Many families are devastated when a child is struck with a critical illness. This may mean one or both parents having to give up work while the child undergoes lengthy treatment. Some companies are now providing specific policies to assist the family in such a catastrophe. A licensed financial adviser will be able to help you prepare a Risk Management Plan… just in case. The information provided in this article is general in nature only and does not constitute personal financial advice.

An often forgotten aspect of insurance

17 August, 202211 August, 2022 Updated on11 August, 2022 Economy, Insurance

When most people think about financial planning, they tend to focus on the wealth creation side of things, but often forget about the wealth protection. Building a financial plan without adequate insurance is like building a house on flimsy foundations. Comprehensive insurance cover can be a significant expense; however, these costs can be made more affordable by taking advantage of the tax deductions that apply to specific types of insurance, and to some methods of implementing insurance. Income protection Due to the high frequency of claims, premiums for income protection insurance can be quite high. However, they are tax-deductible, so the cost is discounted at the same rate as the policy holder’s marginal tax rate. For example, someone on a marginal tax rate of 39% (including 2% Medicare levy), paying a premium of $1,000 would have an out of pocket cost of just $590, after the tax deduction is claimed. It needs to be remembered, however, that any benefits paid under an income protection policy are treated as assessable income, and therefore subject to tax. Life insurance While the premiums for life insurance are not normally tax-deductible to individuals, there is a simple way to gain a tax benefit. Superannuation funds can claim a tax deduction for the life insurance premiums they pay. So, by taking out life insurance via a superannuation fund, a similar result can be gained as if the premium was deductible to the person taking the insurance. Using superannuation to provide life insurance has another potential benefit. As premiums are paid by the fund, it reduces the pressure on household cash flow. This may reduce the ultimate superannuation payout, but if the savings made outside of super are used wisely, the overall financial position should be improved. The proceeds of life insurance are generally not taxable. However, a death benefit paid from a super fund to a non-dependant may be subject to some tax. Total and permanent disability insurance (TPD) TPD insurance is usually attached to life insurance. From a tax perspective it’s treated in a similar way, so implementing it via superannuation is usually the most tax-effective way to do it. However, TPD policies held in super must have a stricter definition of what constitutes ‘total and permanent disability’ than similar policies held outside of super. Trauma insurance Trauma insurance pays a lump sum if the policy holder suffers a defined medical condition or injury. It cannot be implemented through superannuation. Premiums are not tax-deductible, but benefit payments are not subject to tax. As with investing, the main focus on insurance shouldn’t just be on saving tax. It is a protection tool. Always talk to a qualified adviser to ensure you get the appropriate level of cover, and the most tax effective way to implement it. The information provided in this article is general in nature only and does not constitute personal financial advice.

Don’t leave your family’s future in the hands of a crowdfund

11 May, 20224 May, 2022 Updated on4 May, 2022 Insurance

If there is anything we have learnt in the last two years, it is just how quickly things can change. Between devastating bushfires, floods, and a life-altering pandemic (just to name a few), being prepared for the unexpected has never been made more apparent. As confronting as it may be, it is essential to be aware of the grim possibility of unexpected death and the financial impact it would have on our family. Are they prepared and able to cover funeral costs? Will there be sufficient funds for living expenses? For mortgage repayments? It is a harsh reality but one we all cannot afford to ignore. Unfortunately, approximately 58% of Australians have done just that and do not have enough life insurance cover to allow their loved ones to continue living at the same standard they were before the passing of a family member. This issue of under-insurance leaves many desperately scrambling for ways to make up the shortfall and turning to options like ‘crowdfunding.’ Whether via social media or news articles, we often encounter a devastating story that tugs at our heartstrings and our human desire to help others. Mainly in the form of ‘GoFundMe‘ pages, we see devastated families turning to the generosity of others to raise funds. And while there is nothing better than seeing people coming together and supporting those in need, we cannot rely on the goodness of others to help us financially in the tragic event of illness or death. Heartbreakingly, less than a third of crowdfunding campaigns reach their fundraising goals. Additionally, most crowdfunding programs charge additional fees just to start your campaign. Appropriate personal insurance is the only sure way to guarantee a financially secure future for you and your family, no matter what obstacles life may throw your way. Life insurance calculators are a great starting point; they are an easy-to-use tool that considers age, number of dependents, assets, debts, and more, to give you the most accurate estimate of insurance cover for your circumstances. For tailored, expert advice, speaking with an experienced financial adviser will help you secure the most cost-effective and suitable cover for your individual needs. You’ll also feel protected knowing your policy will be reviewed regularly to ensure it covers your current circumstances. The information provided in this article is general in nature only and does not constitute personal financial advice.

Super in your 30s: It’s important to squeeze it in!

2 February, 20223 February, 2022 Updated on3 February, 2022 Budgeting, Superannuation

If you are in your thirties, chances are life revolves around children and a mortgage. As much as we love our kids, the fact is they cost quite a lot. As for the mortgage, this is the age during which repayments are generally at their highest, relative to income. And on top of that, one parent is often not working, or working only part time. Even if children aren’t a factor, career building is paramount during this decade. Are you really expected to think about super at a time like this? Well, yes, there are a few things you need to pay attention to. Short-term plans As careers start to hit their strides, the thirties can be a time for earning a good income. If children are not yet in the picture, but are part of the future plan, then it’s an excellent idea to squirrel away and invest any spare cash to prepare for a drop in family income when Junior arrives. Just remember that any savings you want to access before retirement should not be invested in superannuation. Long-term comfort Don’t be alarmed, but by the time a 35-year-old couple today reaches retirement age in 32 years’ time, the effects of inflation could mean that they will need an income of about $164,287 per year to enjoy a ‘comfortable’ retirement. If you are on a 30% or higher marginal tax rate, willing to stash some cash for the long term, and would like to reduce your tax bill, then consider making salary sacrifice (pre-tax) contributions to super. For most people super contributions and earnings are taxed at 15%, so savings will grow faster in super than outside it. Growing the nest egg Even if you can’t make additional contributions right now there is one thing you can do to help achieve a comfortable retirement: ensure your super is invested in an appropriate portfolio. With decades to go until retirement, a portfolio with a higher proportion of shares, property and other growth assets is likely to out-perform one that is dominated by cash and fixed interest investments. But be mindful: the higher the return, the higher the associated risk. Another option for lower income earners to explore is the co-contribution. If you are eligible, and if you can afford to contribute up to $1,000 to your super, you could receive up to $500 from the government. Let your super pay for insurance For any young family, financial protection is crucial. The loss of or disablement of either parent would be disastrous. In most cases both parents should be covered by life and disability insurance. If this insurance is taken out through your superannuation fund the premiums are paid out of your accumulated super balance. While this means that your ultimate retirement benefit will be a bit less than if you took out insurance directly, it doesn’t impact on the current family budget. However, don’t just accept the amount of cover that many funds automatically provide. It may not be adequate for your needs. Whether it’s super, insurance, establishing investments or building your career, there’s a lot to think about when you’re thirty-something. It’s an ideal age to start some serious financial planning, so talk to a licensed financial adviser about putting a plan into place. The information provided in this article is general in nature only and does not constitute personal financial advice.

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