Posts Tagged ‘life expectancy’

Insurance in super – is your cover adequate?

Friday, January 5th, 2018

If you’ve got super, you probably have some life insurance included. It’s an easy way to get a basic level of cover, but is it enough to give you and your family true peace of mind?

More than 70% of Australians hold life insurance policies, and more than 13.5 million separate policies, through their super funds.¹ Yet despite this, under-insurance remains a huge problem in Australia.

Rice Warner estimates that the median level of life cover in super meets only 60% of the basic needs for the average household, and less for families with children. The position is even worse where total and permanent disability (TPD) and income protection cover are concerned. The median level of cover in super will provide just 13% of TPD needs, and 17% of income protection needs.

Of course, some insurance is better than no insurance, and insurance in super is convenient to set up and pay for. But it comes with a couple of points to be aware of, and this is where professional advice is invaluable.

Limited cover

Firstly, a portion of your super is used to pay the insurance premium. This can help your cash flow if money is tight, but it also means you may not be contributing as much to your retirement savings as you thought.

It’s also worth keeping in mind that super funds offer standardised ‘off the shelf’ policies that may not suit your needs. This helps keep costs down, but that’s no consolation if your policy falls short when you need it most.

Because the insurer pays your super fund which then pays you, it may take longer to receive the money. What’s more, unless you make a binding nomination, the fund trustees have the ultimate say in who receives benefits when you die. Your beneficiaries may also be taxed more heavily than they would if you held the insurance outside super.

A tailored solution

Your insurance needs are as individual as you are, and should be reviewed regularly along with your other financial affairs. Whenever your circumstances change – if you marry, have a child, or buy a new home for instance – your life insurance should be reviewed.

It’s easy to underestimate what it would cost to ensure your family is able to maintain their current lifestyle, come what may. It’s important not to forget partners who don’t earn an income and may not necessarily have cover in their super, particularly where dependent children are involved.

Take the example of Mark, whose wife Suzy, 43, passed away suddenly after an illness. Thankfully, the couple had arranged a full suite of insurance cover in and outside their super. Mark claimed on Suzy’s life insurance which covered his mortgage, credit card and car loan repayments; it also allowed him to hire a part-time nanny to help with their two children.

Getting additional insurance outside super can be a little more expensive, but you will have access to a wider range of policies that can be tailored to your individual needs. Some policies, such as Trauma insurance, can only be bought outside super.

Even if you have some level of cover inside super, it’s important to do your sums to work out exactly how much your family would need to maintain your current lifestyle if you or your partner were to die or become seriously ill. It may take a little time, but with so much at stake, guesstimates won’t do, and we would be only too happy to assist. 

¹ Ricewarner, Insurance through superannuation, 20 April 2016.

Article by TAL

Are you over 30? You need to read this…

Monday, August 21st, 2017

Superannuation is, and will continue to be, a hot topic in the financial advice industry. No matter what your age, once you begin your working life superannuation should be in the back of your mind, but MoneyTalk magazine have uncovered some confronting statistics that it’s worth thinking about if you’re around the age of 30.

If you’re 30 years old today, you have 35 years left in the workforce and need to save enough superannuation to fund you for 35 years of retirement. Now, many of you may be thinking – ‘Hold on a minute, I don’t need to save for that many years!’ well, with the ever increasing medical improvements you just might. The median age of death is increasing by 0.6 years every year, and currently sits at age 84. If this rate continues, by the time today’s 65 year old’s reach their mid 80’s, life expectancy could have been bumped up to around 94 years old!

If you’re in your 30’s or 40’s today, it’s not unlikely that you could need to fund your retirement until the age of 100 – an intimidating prospect for many. If you’re going to live to 100, and only work until you’re 65 it is estimated that you’ll need a nest egg of $3,000,000 – but how are you going to achieve this?

1. Review your superannuation fund now

When reviewing your superannuation fund, take a detailed look at the investment returns and any fees to be paid. Take special notice of tax being deducted from your account before payment needs to be made, this can equate to thousands of dollars’ worth of lost investment returns over the years.

2. Consider making extra contributions

The younger you start contributing extra funds to your superannuation account, the better off you will be. However, there are strict limitations of how much money you can contribute to your fund, and in what capacity you can contribute- familiarise yourself with these rules so as to avoid any mistakes.

3. Build up non-superannuation investments

Think about bettering your financial situation as a whole, rather than focusing solely on your superannuation. Think of how best to build your investments outside of your superannuation, with a view to eventually transferring them into your super in the most tax efficient way. You Financial Adviser can help you to plan this out.

4. Consider gearing

Borrowing to invest money is not suitable for everyone, be sure to speak to you Financial Adviser if you are considering this as an option to boost your superannuation. If done correctly, gearing can be used both inside and outside superannuation.

No matter what your current age, you must consider and plan for your financial future – invest your time as well as your money into superannuation planning.

Source: Money Matters Magazine, December 2016.

An article by Infocus Securities

PROTECTING YOUR FAMILY

Thursday, August 4th, 2016

3d-person-getting-it-right-

INSURANCE

If you are suddenly diagnosed with a major illness or experience a death in the family there is very little time to plan how the family will cope financially.

You might be thinking insurance is something you can sort out later but research shows that 1-in-5 Australian families will be impacted by the death of a parent, a serious accident or an illness such as cancer that leaves a parent unable to work during their working life. Yet 95 per cent of families do not have adequate levels of life insurance * There are things you can do to ensure that you and your family are covered.

UNDERSTAND THE DIFFERENT COVER TYPES

Unlike general insurance which covers assets such as your car and your home, life insurance can protect the financial contribution you make to your family.

There are different types of life insurance that generally cover different life events:

  • Life cover provides security for your family’s future by paying a benefit if you die or are diagnosed with a terminal illness.
  • Income protection can help replace a part of your income (for a set period of time) which can be used to cover living expenses if you are unable to work due to illness or injury.
  • Total and permanent disability (TPD) cover can provide financial support if illness or injury stops you from returning to work or normal domestic duties.
  •  Trauma cover allows you to protect yourself against the financial impacts of being diagnosed with one of a number of serious medical conditions, such as cancer or a heart attack, by paying a benefit.

In practice, you may need a combination of these products depending on your family’s needs and existing financial resources.

PLAN AHEAD

The best way to plan for your family’s future financial security is to ask ‘what if ?’. What if one parent died or was unable to work due to an accident, illness or permanent disability? With the loss of an income you and your family could struggle to meet their daily expenses and ongoing financial commitments.

While families with children have an added incentive to have adequate life insurance cover, young couples and singles may also need protection. What if you become critically ill and need to take time off work? Do you have enough sick leave to cover the rent or mortgage and other living expenses?

Once you have a clearer idea of the amount of money you would need to preserve your family’s current lifestyle, it’s easier to work out the right level of cover for your circumstances.

Life insurance and income protection insurance allows you to approach the future with confidence, knowing that the life you’ve built is protected.

As a financial adviser, I can help you determine the types and level of cover that you need to ensure so you protect your most valuable asset – you. Call me on 0893492700, and we can discuss this further.

Lifewise/NATSEM Underinsurance Report – Understanding the social and economic costs of underinsurance, Feb 2010

How to know if it’s time to review your insurance cover

Friday, April 22nd, 2016

Silhouette of Couple looking in to the distance as part of a jigsaw

It’s the last thing you think of until you need it the most, but signing up for adequate insurance is one of the most important steps you may ever take to carry you, and your dependants (if you have them), through the uncertain future. Take our test to find out if you’re protected.

1. Do you have enough life insurance?

Advocates say you should insure yourself for 10 times your salary – you need enough life cover to handle debts and education costs; to pay for all the various things your dependants will require; and to provide an income stream.

2. Do you have the right cover?

If cash flow is a problem, consider boosting your insurance cover inside superannuation where premiums come from your accumulated retirement savings or employer contributions. Your super fund is required by law to give you coverage, but the average life cover is just under $190,000. If your nominated loved ones are not tax dependants (such as a spouse or a child under 18), they may incur taxes on any payout.

3. Do you have Total and Permanent Disability (TPD) cover?

Could you and your family cope if you were incapacitated and couldn’t work? Remember to bear in mind the cost of any home modifications needed or payment for ongoing treatment.

4. Have you nominated your dependants?

If you take life cover inside your super, consider making binding death nominations to ensure your intended recipient gets the payout. Remember, these have to be updated every three years. If they aren’t, the trustees of your fund can exercise their discretion in deciding who gets your money. And no one wants that.

5. Does your life insurance policy have a terminal illness clause?

Many policies will pay out early if you are diagnosed with a terminal illness and less than 12 months to live. Payouts can vary from the entire amount made upon death, to a pre-determined limit. Not all policies offer this benefit, including some insurance cover provided via super.

6. Is your income protected?

Income protection policies usually cover you for 75 per cent of what you earn, either for two or five-year periods, or up to age 60 or 65. The suggested monthly payout for someone earning $55,000 a year is $3500.

7. Do you have a disaster fund?

This is to cover you for any period before insurance pays out. Six months of salary is a good figure to have set aside in a disaster fund. Applications for income protection can take more than half a year to process. Accessing insurance in superannuation can also take that much time. Covering yourself to bridge such a gap may be wise.

8. Is your home adequately insured?

If you own your home, make sure you have enough cover for it.
Insurers’ websites offer calculators to determine rebuilding costs, including interim accommodation, rubbish removal and inspections, but their estimates can vary, so use one of those that asks for the most detail.

9. Are your contents covered?

Even if you don’t own your home, you need to cover everything inside it – which may be worth more than you think. Policies can offer different options, such as the ability to insure individual items while travelling overseas and new-for-old replacement. Also, check you have liability coverage for incidents that may occur inside and outside your home.

10. Is your car comprehensively insured?

Third-party insurance will cover damage to other cars, but not your own. Comprehensive car insurance covers everything.

The verdict:

• 3 NOs = be alert
• 4 NOs = be slightly alarmed
• 5 NOs = it might be a good idea to sit down with your loved ones and review your insurance cover.

You should be doing this every year or at worst every three years to ensure your cover continues to meet your circumstances, financial needs and objectives . Even if you have no children, but do have a home loan, your mortgage is probably not the only legacy you’d like to leave behind.

An article by PENNY PRYOR Smart Investor

So come see us while this is fresh in your mind, and have this important discussion, so you can have peace of mind, knowing that you have in place a plan for the future.