When it comes to managing your wealth, one of the most important aspects to consider is how you protect yourself against the unexpected. Accidents, illness and sudden deaths happen every day — and in a blink you could lose the assets and the lifestyle you’ve worked so long to achieve. Below I have provided a basic description of Insurances…
Term Life Insurance
Life insurance pays a lump sum amount if you die or are diagnosed with a terminal illness.
This money is used by beneficiaries to
- Clear debts
- Pay funeral expenses
- Ongoing debts that need to be serviced from their income.
Life Insurance can be owned by your Superannuation fund and premiums can be deducted from you balance.
Total and Permanent Disablement Insurance
TPD Insurance Pays a lump sum benefit if you are unlikely to work again due to permanent disability
This money is used to
- Clear debts
- Medical Expenses and Home modifications
- Ongoing debts that need to be serviced from their income.
Two types of TPD Insurance
Any Occupation Disabled, to such an extent that they are unlikely ever again to be able to engage in any occupation:
– For which they are reasonably suited by their education, training or experience; and
– Which is likely to generate average earnings of at least 25% of the life insured average monthly earnings in the 12 months prior to the claim.
Own Occupation Disabled, to such an extent that they are unlikely ever again to be able to engage in their Own occupation.
Trauma Insurance
Trauma Insurance pays a lump sum benefit if you suffer from one of a range of specific medical conditions such as cancer, a heart condition or a loss of a limb.
This money is used to
- Pay medical expenses and enable you to get the best medical support
- Aid recovery by allowing you to take time out
- Ongoing debts that need to be serviced from their income.
What is a Needs Analysis?
A Needs analysis will use personal details and financial details to help work out how much death, total and permanent disablement (TPD), trauma and income protection insurance you may need.
We must undertake a needs analysis if we are to recommend insurance amounts to clients. This must be justified in the Statement of Advice we provide to the client. Contact us to undertake a thorough Needs analysis and ensure you are adequately covered.
What is Group Insurance?
- Insurance policy members are covered under but do not own and are not in control of the policy terms and conditions
- Pricing is not individual but based upon what is set at policy level, meaning members offset the price of each other
- It is nearly always owned in superannuation, meaning the policy terms are also limited by, and altered, to suit superannuation law
- The insurer can be changed, in consultation with the Trustee, and this can trigger a review of cover
- It provides a useful default level of cover for many Australians, but many not be reliable in all circumstances.
And the downside to Group Insurance (examples)
- The majority of Super companies will only have a maximum 2 year benefit period for Income Protection policies.
- IP Waiting periods are being changed from 60 days to 90 days (SunSuper). Premiums remain the same.
- Life and TPD Amounts are unitised. Therefore your cover will decrease as you get older. Premiums remain the same or increase.
- In the event of a TPD claim being successful this will automatically void your Income Protection claim. They will only pay one benefit at a time. (Qsuper)
- IP claims based on the previous 12 months (compared to the best year in the previous 2 or 3 years ) – Indemnity only.
A new definition for Group TPD Cover (E.g Australian Super)
You will be considered totally and permanently disabled if…
…At the end of three months in a row, your injury or illness means that you’re incapable of ever working in any job that you are suited to, based on your previous education, training or experience, or any job that you may reasonably become suited to with further education, training or experience. This will be decided by considering things such as:
- What re-skilling, training or voluntary work you have done already,
- Any retraining or reskilling you reasonably could be expected to do, and
- Any rehabilitation you have done already or any rehabilitation you reasonably could be expected to do.’
Group Insurance – The small print (Examples)
Exclusions:
- You are not insured if your injuries or sickness are a result of pregnancy
- Not covered for IP if you no longer making contributions into your Super, or your casual or part-time employed. (Qsuper).
- Not covered for pre-existing conditions: – Income Protection Benefits won’t be paid for the first five of insurance cover if your medical condition existed before your cover commenced (Qsuper).
Group Insurance – Premiums are increasing!
Australian Super, from June 29 2013
- Life and TPD increased by approx. 38%, Income Protection increased by 25%
Host Plus, from December 2013
- TPD Premiums increased by up to 80%
REST Industry Super, from July 1 2013
- Life up 45%, TPD up 30%
CBUS, From July 1 2014
- TPD increases up to 200%, Life increases of 15 to 20%
SunSuper, from July 1 2014
- Life and TPD increases of up to 100%
Qsuper, from 1 January 2015
- Increase of 40% across all policies.
How it could impact you..
“A 40-year old joining Australian Super’s default plan after 1 July 2014 will see their weekly insurance costs fall to $10.02 from $11.93, but the amount of TPD disability cover they are eligible for will decline by two-thirds. IP will fall from up to $3,000 a month to up to $2,500 a month, but the amount of life cover will increase.”
Stuart Long – Client Services Manager
