Tag Archives: insurance

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.

Create a great financial new year

New Year’s resolutions are easy to make but often hard to keep. But there are real benefits to making financial resolutions. Here are some helpful suggestions to get you started.

Chances are by now, you’ve forgotten what you wanted to achieve last New Year’s Eve, but a new financial year is also a great time to reset.

Get back to basics

If you find it near-impossible to reach your financial goals, you may need to revisit the basics: sticking to a budget. Does temptation usually unravel all your good saving intentions? Consider opening a locked savings account that you can’t deduct money from for a period of time, and automatically transfer funds into it each payday.  Automating everything in your life that can be is truly a gift!

Plan for large purchases

Whether you need a new fridge or are considering placing a deposit on a home, the earlier you start planning for these purchases, the more manageable they become.

If you know you’ll need a new item in 6 months that costs $1,000,  that means you need to set aside around $40 per week to make it happen… that’s a few sneaky coffees that may need to go!

Set up an investment plan

If you’re considering investing this year (instead of someday,) developing a sound investment plan is essential for your success. This may include working with your financial adviser to identify clear financial targets, calculate how much you can afford to invest and determine how much risk you’re willing to take on. 

If you’d like to have a small nest egg before you sit down with someone, again, automate the process so every week you’re setting aside an amount to put towards that portfolio.  Everyone started somewhere!

Review insurance policies

Knowing you are properly insured provides peace of mind if your circumstances change unexpectedly. But identifying appropriate insurance policies and levels of coverage for your unique situation can be difficult – and getting it wrong is risky… as you’ll likely find at claim time. This is why it’s important to regularly review your insurance policies with your financial adviser, especially if your situation changes.

You may be able to find that funding via various structures frees up cash flow to invest in personal insurances you may not have otherwise been able to afford.  Good advice is worth every cent!

Check your super

If you have multiple superannuation accounts – or have forgotten where your super is – you’re not alone. According to the Australian Taxation Office, there’s $18 billion of lost super waiting to be claimed nationally.1

Effectively managing your super is vital for building your retirement nest egg. Contact your financial adviser who may help you manage your super.  It’s also worth seeing what insurances are covered in your fund so you aren’t paying extra for cover you don’t need.

Set retirement goals

The earlier you set clear goals for your retirement, the more options you’ll have. Work out what assets you have – from your home to superannuation – and review your current spending patterns, then determine your goals for retirement and what lifestyle you’d like to enjoy. This will help you calculate how much you’ll need.

Remember, we’re now living a lot longer, which means our money may now need to last 30 years in retirement, or we may choose to work longer.  Our health is also an issue that needs consideration as we age and this too will impact our retirement years.

Create an estate plan

Estate planning involves more than writing a will. It outlines what you want done with your documents, contacts, debts, bills and assets, making the process easier for your beneficiaries after you’ve passed away.

Whatever your financial New Financial Years’ resolution may be, seeking professional advice may help you make it reality this year.

 

Note:
1 The Sydney Morning Herald, 2017, ‘Almost $18b in lost super waiting to be claimed’. Accessible at:

http://www.smh.com.au/money/super-and-funds/tax-office-holds-records-of-almost-18-billion-in-lost-super-20170920-gylo3z.html

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.

Have you heard about Child Trauma Cover?

If you’ve got kids, then one of the biggest things to concern you is their health.  Sniffles and colds are par for the course, as are bruises, bumps and scrapes.  But sometimes, life takes a much more serious turn… and I don’t just mean a broken arm!

Serious childhood illnesses can include cancers and tumours, organ failure, severe burns, traumatic head injury and blood borne illness.  Most of us know someone who’s had to nurse their little ones through leukemia or heart surgeries from quite young.

Many I speak with however, are unaware that Child Trauma cover even exists.  When I first heard about the cover, I made sure my children were signed up as soon as eligible. They have to be aged 2 to qualify.

In the event of a claim, the funds can be used to cover medical costs that may otherwise leave you well out of pocket.

A major factor in a child’s ability to pull through a major illness or injury can be the ability to spend time with parents, both preferably, through their convalescence.  So the lump sum received isn’t just about costs, it may also allow time off work as unpaid leave to allow you to just ‘be there’ for your little poeople.

But if you’re thinking the cost is prohibitive, think again.  Cover is approx. $1 for $10,000 cover, per month.  So, $100k is around $10 per month or $120 per annum and can be added to your existing personal insurances like your own Trauma cover (and only outside of superannuation.)  And, when the kids turn 18 or 21, cover can be converted to Adult Trauma cover with no underwriting.

 

 

If you’d like to investigate this cover further, don’t hesitate to give me a call or chat with your financial adviser.

The Truth About Cats and Dogs

Did you know that 3 in 5 households in Australia own a pet?  38% of us are dog owners, 29% have a cat, 12% fish, 12% birds and 9% some other animal like reptiles, bunnies (not for Queenslanders!) or guinea pigs.

Mostly, we love our furry friends for the companionship they give us – that undying love and having someone who actually wants to see us waiting at home every night!  Others buy to teach the kids responsibility and some to keep them fit and active.

But there’s plenty of good reasons why we don’t own pets as well!  Some don’t want the responsibility, others don’t have a home that’s suitable or aren’t allowed by their body corp.  But a very large reason comes down to cost!

Have you every had to weigh up the average cost of pet ownership to see if it’s for you, or don’t know where to start?

According to one source, the average cost of owing a dog annually is around $1,475 and a cat around $1,029.  Fish would be lucky to set us back $50, depending on how luxurious our tank is, and a bird around $115 per year.

Pet insurance is still in its infancy with only one in four dog owners having cover (costing approx. $293 p/a) and one in five cat owners taking out cover (approx. $246 p/a.)

Pet insurance isn’t always available if your furry friend is getting on in  years and some breeds are dearer than others to insure.  You’ll also need to check what’s covered as some  routine check-ups, desexing and dental may not be insured events.

Having three pets, I’d decided against pet insurance, but when my English Staffy did her patella in last year, needed medication and X-rays and then emergency desexing, the average costs went out the window!  Having said that, it certainly paid to shop around with one vet offering a service for $4,000 that another did for $1,200 – and very well thankfully!

The kids were not prepared to let their beloved dog suffer or be put down and were happy to pitch in to cover the costs.

So, if you’re counting the pennies, it’s definitely worth weighing up the costs before taking the plunge into being the resident human for your new fur love.  But if you adore your fur babies more than anything, cost is hardly likely to be a factor in your pet ownership adventures.

Sources: Pet Ownership in Australia 2016 (Animal Medicines Australia) and Pet Insurance Australia, 2015.