Life Insurance

Life Insurance

Protecting loved ones is a natural instinct, but how can you protect them if you’re not around? In the event of your death life insurance helps your family maintain their financial position by providing your beneficiaries with an agreed lump sum.

Life insurance can be critical for a secure financial future. In simple terms, you insure yourself for a particular amount and, in the unfortunate event that you die, the insurer pays that amount. The lump sum payment can be used to help with the repayment of debts, the covering of future needs (for example, the cost of children’s education or long-term care), as well as providing funds for investment to generate an income or to keep your business afloat. We don’t like to think about ‘worst case scenarios’ but taking some time to consider the risks and having a contingency plan is like carrying an umbrella –it can’t stop the rain but can provide much needed financial protection during life’s storms.

Factors to consider when looking at Life Insurance are:

  • You should make sure you have an adequate level of cover for your needs. Under-insurance can present a serious problem.
  • Changes in your personal circumstances (i.e. taking on additional debt) often necessitate the need for higher insurance levels.
  • Death benefits received via a superannuation policy may be taxed.

Many, but not all, life insurance contracts allow a policy owner to nominate a beneficiary, or beneficiaries, to receive any life insurance policy proceeds being payable to the policy owner.
Ensure you nominate your beneficiary and make changes as your circumstances change. Life insurance isn’t complicated and needn’t be expensive.

Even if you don’t have dependants, life insurance can provide other benefits such as covering funeral expenses, tidying up your affairs, or providing someone you love with an inheritance.

Total and Permanent Disablement Insurance (TPD)

Total and permanent disablement (TPD) is your financial back-up plan. It gives you the confidence to seize life’s possibilities, knowing you’ve made plans to secure your family’s financial future… just in case!

TPD insurance will provide a lump sum payment in the event you suffer an illness or injury which totally and permanently prevents you from working again.

Broadly speaking there are two definitions of TPD:

  • Own occupation – The insured must show that they have a total and permanent disability that prevents them from working in their own occupation which they disclosed when applying for this cover. ‘Own Occupation’ is a more liberal definition of disability because, even if you can work in another occupation, you may still be eligible to receive disability benefits. Own occupation coverage is often more expensive and may only be available to individuals who have a clean medical history and work in a relatively risk-free occupation.
  • Any occupation – The insured must show that they are totally and permanently disabled and unable to work in their usual, or any other occupation for which they are reasonably suited by their education, training or experience. ‘Any Occupation’ is often the cheaper option, however it can be more difficult to meet the requirements of this type of disability definition.

Some insurers have a additional definitions available to clients – such as a ‘homemaker’ definition. Payment of benefits under this definition would be based on the proviso that the insured, through sickness or injury, is unable to do any normal physical domestic duties and will never be able to do so again.

Factors to consider when considering TPD insurance are:

  • Make sure you have adequate coverage.
  • Changes in your personal circumstances often necessitate the need for higher covers of insurance.
  • There may be taxation consequences where a disability lump sum superannuation payout is made.

TPD insurance can provide a lump sum benefit which can be used in many ways, such as helping to pay for recovery and rehabilitation costs, such as refitting your home, enabling a partner or family member to reduce their work hours to care for you, paying for a professional carer or providing much-needed funds to repay debts, and creating an ongoing income stream for the future.

Trauma Insurance

“It won’t happen to me…” Maybe you’re right. Maybe bad things only happen to other people. But that doesn’t mean you want to risk being caught unprepared – and uninsured.

Trauma insurance, also known as critical illness insurance, provides a lump sum benefit if the insured suffers a “critical condition” as defined by the insurance provider. Trauma insurance is designed to help you recover financially from a trauma or crisis, such as a heart attack, stroke, cancer or other life threatening conditions.

Factors to consider when looking at Trauma insurance are:

  • You should ensure your insurance cover is adequate for your needs. Under-insurance can present a serious problem.
  • Critical illness cover is generally not held within super. However, this insurance type may be connected with other insurances that are held in super, which can reduce the administration and costs of implementing the insurances via separate policies.
  • Workers compensation only covers work related injuries.

Medicare and private health insurance do not cover all the costs. Health cover may be limited in the choice and flexibility of treatments. It often does not cover hospital and treatment expenses in full, and some conditions aren’t covered at all. Out of pocket expenses such as the cost of a carer and rehabilitation expenses aren’t covered, nor is the income lost from time off work. Similarly, Government allowances and benefits often don’t go very far in covering you against all the costs involved in a major accident or serious illness.

Trauma insurance pays you tax-free lump sum for a range of specified life-threatening illnesses or injuries. There are no restrictions on how the payment is spent.

Income Protection Insurance

Who will look after your finances if you can’t work due to sickness or injury? Health insurance may cover a proportion of your medical bills, but it won’t cover your rent or mortgage and living costs.

The majority of Australians have no trouble insuring their home and contents from fire, theft and weather damage. It makes a lot of sense to take out insurance on your home.

It’s your biggest asset, right?

Wrong… The average Australian could earn around two and a half million dollars in their lifetime, much more than the value of the average home. And yet the majority of income earners don’t insure their largest asset – their income earning capacity.

Your home, car, food, clothing, children’s education –all depend on your income. That’s why for many the loss of income resulting from the inability to work due to sickness or injury can cause serious financial hardship. When you think of how your lifestyle could be affected, it simply doesn’t make sense to overlook this important cover.

Income protection insurance (also known as salary continuance) is designed to provide a regular income in the event that you are unable to work due to sickness or injury. Generally, income protection insurance provides a regular income during a period of disablement for up to a pre-determined and agreed benefit period. The benefit amount payable is up to 75 per cent of your income.

Things to consider when looking at income protection are:

  • The shorter the waiting period and the longer the benefit payment period, the more the insurance will cost.
  • Income protection insurance is important when borrowing to invest (gearing), as it can help meet interest payments if you are unable to work due to illness or injury.
  • Your insurance cover should be adequate for your needs. Under-insurance can present a serious problem.

Workers’ compensation will only cover you for accidents or injuries that occur during working hours or for an illness that is a direct result of your employment. And, if your illness or injury is covered by workers’ compensation, be aware that the benefit is capped under the different state regulations.

Business Life Insurance

Running a successful business takes time, money and lots of hard work. Insuring your business should be top of your mind when you’re thinking about what might happen if you were totally and permanently disabled and couldn’t work.

No one wants to think about the what ifs but if you are a partner in a successful business, the ‘what ifs’ can’t be ignored.

Perhaps you started your business with a group of friends and built your dream together? Perhaps you bought into the business, or inherited it from your family? Whatever your situation, the relationship you have with the key people in your business probably extends beyond your work.

You’ve shared the highs and lows of building and running a business as well as your personal ups and downs. You’ve probably shared social occasions and know each other’s spouse and children. In many ways, your lives are probably entwined.

  • What if something happened to you or another partner in your business?
  • What would happen to your business or family assets if you were to die or become permanently disabled?
  • If you died, would your business partners be able to pay out your family/estate for your share of the business?
  • Would your estate be liable for your business guarantees if you were to die or become permanently disabled?
  • What would happen to your family if you were no longer bringing in an income?
  • How would the business survive the loss of one of the partners?

Now is the time to discuss the ‘what ifs’. It’s also the time to put plans in place to decide what would happen if you or another business partner suddenly left the business or who would take over and how the business would be valued. Business insurance is not just about securing the future of your business… it’s also about securing the future of those you care about and who rely on you for financial support.

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