Category Archives: Insurance

Four ways to manage the rising cost of living

Be smart with your spending.

The increasing cost of goods and services is a reality most Australians have to deal with.  It’s certainly not getting any easier to ‘make ends meet.’  Data from the Australian Bureau of Statistics (ABS) shows that living expenses for employee households were up by 2% in September 2018 compared to just a year ago.1

But there’s no need for panic! By being organised and smart with your finances, you could manage rising costs without draining the savings… provided you have any!

1. Cut back on major expenses

Trimming your expenses is one of the easier ways to manage the high cost of living. But rather than taking a piece-meal approach, it may be more effective to cut back on some of the large drains on your earnings, such as food and transport costs.  Take those leftovers to work!  Compare the costs of major must haves like energy bills and be sure to review insurance expenses.  There’s many comparison sites, brokers and advisers who can help you get a better deal or ensure what you have is right for you.

2. Reduce lifestyle costs

It may be worth auditing your lifestyle costs to see if these too could decrease. While you don’t have to give up all the things you enjoy, cutting down on, for example, your overseas holidays or dining out could go a long way in reducing your costs.  Maybe instead of a meal out every week, you cut that to fortnightly.  Perhaps every second year you go off-shore rather than every year.  Check for those cheaper vouchers or groupon deals before heading out to the movies, shows or restaurants.

3. Create a budget

Having a budget and sticking to it may also help you minimise unnecessary expenses. As boring as it sounds, a budget tracks your weekly or monthly spending and may help ensure you have enough money to cover essentials, build up your savings and handle unexpected or increased costs. You may wish to consider working with a professional financial adviser or using software that links with your bank accounts to create a budget that factors in your income, expenses and financial obligations.

Knowing your numbers is vital to staying on top of it all.  Being frugal has a whole new lease of life – check out those dedicated to keeping on top of it all online.

4. Supplement your income

Increasing your income may be another way to ride out the rising cost of living.  Go ahead and ask for that pay rise!  You could take on extra work in your spare time or start a side hustle.  Perhaps you could become a private tutor in your field of expertise, rent out your spare room sometimes or pet sit.  Even selling old unused clothes, sporting equipment or items no longer needed could assist.

If you have enough savings on top of your contingency fund, you may want to invest to grow your capital and earn interest. Your financial adviser may recommend strategies to help you generate an income from your investments.

The high cost of living may affect your savings and lead to money-related stress. But if you’re smart about your finances, you can still keep your cost of living in check and remain financially secure.

 

1. Australian Bureau of Statistics, September 2018, ‘Selected Living Cost Indexes, Australia’. Accessible at: 

http://www.abs.gov.au/ausstats/abs@.nsf/PrimaryMainFeatures/6467.0?

Here’s why you need income protection

Your ability to earn an income is usually one of your biggest assets, so why not protect it?

Income Prot

A sudden illness or injury can keep you from working and leave you in financial difficulty. You may get help from a worker’s compensation payout or personal savings, but are they enough to help you meet your expenses and financial obligations?

Taking out an income protection (IP) plan may help provide peace of mind that you’ll be able to meet your financial responsibilities and focus on recovering. IP cover may provide a monthly income while you’re unable to work as a result of illness or injury. It generally replaces up to 75 per cent of your income for a set period of time.

Standalone or through super?

Getting your IP cover through your superannuation fund may be a good idea if you want to avoid paying for your insurance out of pocket. But keep in mind that the policies offered through super may not cover all your financial obligations for an extended period of time.

A standalone IP policy may provide more adequate coverage. It may also offer you tax benefits – IP premiums are usually tax deductible when you fund your cover outside super.

Making your policy affordable

If cost is a concern in taking out a standalone plan, there are a few ways you may be able to make your premiums more affordable. One of them could be choosing a longer waiting period before you receive benefits after being unable to work due to illness or injury. Generally, the longer you wait, the lower the premiums you have to pay.

Opting for indemnity cover may also help you keep your insurance costs down. You’ll have to choose between indemnity and agreed-value cover for your IP plan. Under an indemnity policy, your insurer bases the monthly benefit you would be paid on your income at the time you make a claim. For an agreed-value policy, the benefit is based on your income when you apply for coverage. Premiums for indemnity cover are usually lower than for an agreed value policy.

But indemnity policies may vary among providers, so speak to your adviser about which cover may suit you. Your adviser may also help you tailor your plan to meet your income protection needs.

Saving for retirement: Hacks for parents with dependents

You can build your retirement savings while supporting your dependants.

Providing for the kids doesn’t have to come at the expense of stashing funds for retirement. There are ways you can build a sufficient nest egg while supporting your children.  And chances are, you’ll be spending a lot longer in retirement than previous generations… who knew?

Saving for retirement

Forced saving can be your best ally in building your retirement fund. Making voluntary contributions to your super through salary sacrifice can seriously boost your nest egg.  You can make concessional super contributions of up to $25,000 each financial year (which includes your employer’s super guarantee contributions.) The government will tax your salary-sacrificed contributions at 15% which may be much lower than your marginal tax rate.

It may also be worth looking at how and where your super fund invests your money. Choosing a different investment option may help you earn better returns and grow your super.  Do you know what your Investor Risk Profile is?  Conservative?  Balanced?  Aggressive?

Super can be a difficult subject to get your head around. Have a chat with your adviser about how you can boost your super by making voluntary contributions or changing your investment options. Your adviser can also knows about retirement saving options beyond super.

Protecting your income

While you’re building your fund for retirement and still supporting those eating you out of house and home, it’s important to protect your current income in case you’re unable to work due to an illness or injury. Taking out income protection insurance is an incredibly wise precaution against any event that can prevent you from working. This policy may provide a monthly income to support you and your family during your recovery and help you stay on track with your financial commitments.  Premiums are tax deductible.  And if you think about it, why wouldn’t you insure your most important asset? – the ability to earn an income!

It’s also crucial to ensure your dependants are looked after if you die or became seriously ill or disabled. Having life insurance, total and permanent disability cover, and trauma insurance can help you protect what’s important to you.

Get advice

Balancing your need to prepare for retirement and your responsibility to your partner and kids can be tough, but keep in mind that help is always available. Speak to your adviser about how you can provide for your dependants while building a nest egg for a comfortable retirement.

Your future self will thank you for it!

Managing the cost of Insurance

You don’t have to cut corners on your insurance or sacrifice the adequacy of your cover to make your policy more affordable.

A necessary evil?  A must have?  Love it or hate it, you’re likely to need insurance in your life!  But how do you get the most bang for your buck?  This article deals with options available for personal insurances like Life and Total & Permanent Disability, Trauma Insurance and Income Protection cover.

Choosing a payment structure

Choosing stepped premiums in the first few years of your life insurance policy may help you keep the cost of cover low in the beginning. Stepped premiums allow you to start paying your insurance at a lower rate, which then rises as you grow older. Your insurer calculates your premiums on each policy anniversary based on your age, and sometimes with CPI too.

You may consider moving to level premiums as you become more capable of paying your insurance. Although they’re more expensive in the beginning than the stepped structure, level premiums generally offer a good long-term savings because premiums are calculated based on your age when you first take out level premiums.

Using your super

Taking out life insurance through your superannuation fund may lower the cost of insurance because premiums may be paid using concessionally taxed contributions paid from your employer or sacrifices into your super. Premiums can be cheaper because super funds bulk buy insurance policies and can negotiate discounts (group insurance.)  Individually, some offer a 15% discount or rebate off premiums due to the concessionally taxed structure of Superannuation.

But keep in mind that super funds may offer limited cover. Talk to your adviser on how to ensure you have enough cover.  And make sure you don’t constantly erode the value of your retirement savings with large premiums.

Waiting for a longer period

When taking out income protection insurance, you can choose a waiting period. The longer you wait before receiving income benefit payments, the lower your premiums.  Make sure you have enough in savings or an offset account to tide you over – and remember, payments are made 30 days in arrears – so a 30 day waiting period may still mean 60 days before you get paid!

You can also choose between an indemnity policy and an agreed value policy. Taking out indemnity cover may help you keep the costs down because premiums are generally lower than those for agreed value cover.

Income protection premiums are usually tax deductible if you fund your cover outside super, helping make this policy affordable. If you pay your insurance through your super, premiums are generally tax deductible to the super fund.

Getting advice

With so much to consider, seeking advice from a professional financial adviser is important to help make insurance affordable – and manageable – for you and your circumstances.  Give us a call if you’d like some help.  07 5593 0855.

Are you a Key Person?

Key-person insurance is Protection for your business

How would your organisation cope if something happened to a key person?

Unexpected events can play havoc not only with people’s lives but also with businesses.

However, business owners are often so busy they don’t stop to consider the true cost of the loss of a key employee, business partner or even themselves.  Eeeek!

The knock-on effects may include disruption to other staff, missed opportunities, delays or penalties for late delivery of projects, lost revenue, increased expenses, significant costs to find and train a suitable replacement, loan repayment and even loss of the business.  Ouch!

What is key-person insurance?

Key-person insurance protects a business’s financial position against the significant impact of a traumatic event such as the death or disablement of a key person.

A key person may be an employee, owner or an individual whose contribution to the business is significant.

This cover is not a specific kind of insurance but the application of life insurance to protect against key-person risk. It can be used with buy/sell life insurance (also known as business succession insurance) which covers the change of ownership if an owner dies or becomes incapacitated.

The benefits

Often a cash injection to an affected business may keep a bad situation from becoming worse or even catastrophic. The insurance proceeds may be used to:

  • minimise or eliminate the potential loss of revenue, sales or profits
  • help cover the often significant costs of finding or training a replacement
  • service or repay any debts that are called in
  • cover the impact of a writedown in the goodwill of the business
  • provide needed liquidity
  • help keep staff and maintain essential supplier relationships.

Are there alternatives?

A business may have other strategies to help manage their risks, including asset sales, promoting staff or reallocating workloads even temporarily, using profits, borrowing more, or drawing down existing loan facilities.

However, insurance is the only practical alternative where a business doesn’t have the capacity to cover its risks.

If you want to know more and see if it can apply to your business, why not give me a call? 07 5593 0855.

Running a Small Business? Make sure you are properly insured

Running a small business is hard work. The last thing you need is to lose it all because of poor insurance choices.

Do your homework

First you need to work out what needs to be covered. There are the obvious things such as plant and equipment, the less obvious things such as public liability, professional indemnity, and finally protecting the financial performance and position of the business on the sudden loss of a key person.

Policies should cover a wide range of eventualities and each business should have a policy package specifically geared to its needs.

People are the most important assets, and the success of the business may hinge on key personnel.

Business expense insurance can cover certain fixed business expenses, and key-person insurance can protect the financial performance in the event of a key person or business owner dies, is permanently disabled or suffers a traumatic event.

Insufficient coverage

Owners risk losing control of their companies, serious financial losses, and complex partnership problems by being uninsured, or underinsuring against something going wrong.

Having the wrong kind of insurance is equally risky and ultimately a waste of money, which is why it’s necessary to seek advice on the right insurance for your business.

It’s also important to regularly review and update your insurance, especially when your business grows or changes.

There is always tax

You do not have to pay capital gains tax (GST) on a business insurance settlement, provided you tell the insurer before making the claim what proportion of the premium you can claim GST credits for, which will be the part that relates to business purposes.

But remember, your accountant should assess all taxation matters.

Working together with your financial adviser to determine what insurances can be put in place is an important consideration when running a business.

The Insurance Council of Australia, http://www.understandinsurance.com.au, and the Australian Taxation Office, www.ato.gov.au, have more information.

How to cope financially with illness or injury

Bills still need to be paid even if illness or injury keep you out of work. But help is available if you need it.

Dealing with a serious illness or injury is stressful enough without having to consider how to cope financially.

However, making sure you get everything you are entitled to and offsetting bill payments can help relieve some of the stress of an already traumatic circumstance.

Advocates

When you are injured or ill, it’s easy to miss important information, so it’s essential to have someone by your side who can listen, question and ensure your needs are met.

Choose someone you can trust, such as a close relative or friend, who can be your advocate, and help understand instructions from medical professionals as well as organise any medical payments.

Services

The available government services include the Department of Human Services or Centrelink.

In very limited circumstances, you may get early access to your superannuation on compassionate grounds if the illness or injury is catastrophic. You can apply through the Department of Human Services.

You might also like to contact Financial Counselling Australia to talk to someone who can provide free, unbiased information to help with your financial difficulties.

Employment

Ask your employer how much paid sick leave you have, whether you can take unpaid leave, and how long you can have off work. The Fair Work Ombudsman’s sick and carers’ leave information covers your rights at work.

Insurance

Check your insurance policies, including any linked to your superannuation, to see if they provide income support or bill payment help.

Types of insurance include:

  • income protection, which provides an income if you are unable to work
  • health insurance, which can help with medical costs
  • total and permanent disability insurance, which can be included in your superannuation and covers the costs of rehabilitation, bill payments and living costs
  • trauma cover, which covers specified illnesses or injuries.

Reach out

Open up about your circumstances to your debtors and ask for a hardship variation to your bills or a repayment plan that offers paying in instalments.

From setting up these repayment plans to choosing appropriate insurance, a financial adviser may help you take care of your finances while you’re injured or ill, which means you can focus on recovering.

If you’re unsure even where to start, give us a call and we can review your paperwork to see if you’re eligible for any claims.