YOUR INSURANCE SURVIVAL GUIDE - rc.futureassist.com.au · - YOUR fAmILY, ASSEtS & IncOmE concise tips, facts and questions to help you get it right PL U S 20. 2 yoUR INSURANCE survival

by Lauren Samsely - DFP

& Adam Ghanem - ADFP

YOUR INSURANCE SURVIVAL GUIDE

PROtEctInG whAt mAttERS mOSt- YOUR fAmILY, ASSEtS & IncOmE

concise tips, facts and questions to help you get it rightP L U S20

2

yoUR INSURANCE survival guide

If something happened to you and you

were unable to work, would you have

enough money set aside to cover your day-

to-day bills, and to look after the people

who rely on you? It’s estimated that one in

three Australians will be unable to work due

to illness or injury for a three-month period

or longer during their career. Despite this,

many of us put insurance off, believing we

may never need it.

This guide will give you a clearer picture of the

risks, how insurance works, the different

options available, and how to avoid common

mistakes.

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Insurance is one of those areas where our beliefs may

be at odds with actual statistics, especially if we don’t

personally know someone who has been affected. But

the fact is that life doesn’t always turn out the way we

plan. Illness and accidents are a reality and can leave you

unable to work.

We all understand how much of a nightmare it could be

if our home flooded and we didn’t have house insurance,

or if we crashed into the back of a Mercedes and didn’t

have car insurance. But surprisingly, many of us are less

prepared when it comes to insuring our lives.

In Australia, we’re more likely to insure our possessions than ourselves:

facts vs assumptions

89% 87% 14% 6% 5% 2.5%have

Total & Permanent Disability Insurance

have Income

Protection

have Life

Insurance

have Home

Contents Insurance

have Motor Vehicle

Insurance

have Trauma

Insurance

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Average cost of heart valve surgery

Average cost for someone living with Parkinson’s

disease for 12 years

Average cost of spinal surgery

(including rehabilitation)

$105,467 $144,000$51,484

Some of us feel the insurance cover inside our superannuation is adequate, but it only

represents 20% of the cover required. To put this into perspective, take a look at the

financial implications of injuries and healthcare in Australia:w Personal insurance products

• 131heartattacksarereportedeveryday,or

one heart attack every 11 minutes.

• In2009,thenumberofdeathscaused

by a heart attack ws the same for males

and females. Therefore, a female is just as

likely to die from a heart attack as a male.

•1 in 2 Australians will be diagnosed with

cancer by the age of 85.

•Morethan60%ofcancerpatients

will survive more than five years after

diagnosis.

•Thesurvivalrateformanycommon

cancers has increased by 30% in the past

two decades.

Source: http://www.heartattackfacts.org.au/heart-attack-facts/http://www.cancer.org.au/aboutcancer/FactsFigures.htm

FAST FACTS

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personal insurance products

As you may be aware, there are

numerous personal insurance products.

These include:

LiFe inSurAnCe

Provides a lump sum to your beneficiary in

the event of your death to cover things like

mortgages, debt and replacement income.

ToTAL & PermAnenT DiSAbiLiTy (TPD)

inSurAnCe

Provides a lump sum in the event that you

become permanently disabled and never

able to work again. It’s generally there to

cover mortgages and debts, replace income

and help with alterations to your home (e.g.

wheelchair access).

There are four types of TPD payout:

1. ANY occupation: If you can’t ever

work again in your job, or in any

job for which you may be suited by

education, training or experience

2. OWN occupation: If you can’t ever

work again in your current job

3. ADL (Activities of Daily Living):

If you can’t perform at least two of

your activities of daily living (these

include bathing, dressing, toileting,

mobility and feeding)

4. Home Duties: Applies if your sole

occupation is to maintain your

family home. You are eligible if

you can’t perform all those duties

– (e.g. cleaning, cooking, laundry,

food shopping, and taking care of

dependent children)

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inCome ProTeCTion inSurAnCe

Provides a monthly benefit if you’re unable

to work due to injury or illness. You can be

covered for up to 75% of your annual income

(including super). There are many different

ways to alter your Income protection policy

to suit your budget and circumstances, but

the three main variables are:

1. Agreed or indemnity cover: Agreed

means that you lock in your income at

the time of application. Indemnity means

you’re rated on your income at the time of

claim (generally the cheaper option).

2. Waiting periods: This is how long you’re

willing to wait until you receive a payment.

The longer you’re willing to wait, the

cheaper the cover.

3. Benefit period: This is how long you

would like the claim to pay you for.

The longer the benefit period, the more

expensive the cover.

TrAumA inSurAnCe

Provides a lump sum to help cover

medical expenses if you were to suffer

a certain condition. There is a schedule

that covers around 47 conditions, and

(depending on your product) around

20 less severe conditions for which you

may receive partial payments. In general,

trauma insurance covers events such

as cancers, stroke, heart disease, or

other health events such as dementia,

Alzheimer’s, sclerosis and severe diabetes.

ChiLD TrAumA inSurAnCe

Provides a lump sum to the guardian/

parent if their child were to suffer a certain

condition including death. This type of

policy can only be taken out with an

adult’s policy linked to it. The product

generally has minimal associated costs

and can give you peace of mind that you

would be able to provide your child with

the best treatment if needed.

buSineSS exPenSeS inSurAnCe

This provides a monthly benefit for self-

employed people to cover fixed expenses.

The maximum period this policy can

pay out for is one year. This can cover

expenses such as rent, electricity, leasing

costs and bank charges.

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what do you actually need?

We’ve briefly covered the different

types of insurance. There are other

variables that determine which types may

be right for you, such as your occupation

and duties at work, your age, your current

health, your income and the cost of the

insurance. Primarily, you need to consider

what’s most important to you.

It is important that to recognize that the

most valuable asset is you! As such

insurance is an integral part of any good

financial plan and should ensure there

is appropriate protection for you, your

income, assets and family.

Example scenario:

You become ill due to what you and

your doctor believe are chronic stomach

cramps. You need to take time off work and

your Income Protection insurance kicks in,

helping to cover ongoing bills. Years later,

if those stomach cramps turn out to be

something more serious, this is where your

Trauma Insurance kicks in – to help cover

potentially expensive surgery costs. If your

ailment subsequently evolves into a Total

or Permanent Disability (TPD) and you’re

unable to return to work, TPD insurance will

help with the cost of any rehabilitation.

Primarily, you need to consider what’s most important to you.

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When calculating your insurance needs

and assessing what is important to you, the

following questions may be useful.

• DoIhaveanydebts?Whatarethey?

• IfIweretopassawayprematurely,how

would my family cope with the mortgage?

• WouldIbeabletopaythebillsfor12

months if I were to get sick or was injured?

• Whatimpactwouldithaveifmypartner

were to fall ill, suffer an injury or die?

• WhatinsurancedoIcurrentlyhaveinmy

superannuation and what does it really

cover?

• Howmuchdomydependentsneedfor

personal necessities such as food, clothing,

transportation etc?

• HowwouldIcontinuetopayforeducation

fees and other expenses if my income

diminished or stopped suddenly?

• Whatwoulditbelikeforyourfamilyand

spouse if you passed away (or were injured)

and your current cover wasn’t enough to

pay off your debts and support them. What

would they need to do to cope?

As well as choosing the most relevant

insurance cover, it’s important to

consider affordability. You should ensure

that your financial plan provides you

with adequate cover, but also allows

your superannuation fund or personal

investments to grow so that you can

achieve your retirement goals. As some

insurances can be held inside super and

some externally, it’s important to consider

your budget to fund some of these

insurances. It’s also important to find

which insurances are better funded within

super and which ones are worth paying

out of your own pocket.

Independent advice can help you to

navigate all these variables.

There are over 15 life insurance providers

in Australia and it’s not easy to find which

is right for you.

This is where an independent financial

adviser can help you find the right cover

for your financial plan.

questions to help you decide what’s important to you

Most people have different views on insurance. Some feel the need for full cover to protect

their wealth and families; others are satisfied with partial cover only. The insurance cover

in your financial plan should be tailored to your individual wants and needs. That’s why it’s

important to understand what you want and the different options available to you.

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Life is full of choices, and today there are more than ever before. Are you falling for the

marketing hype? In the media we’re bombarded constantly with messages about quick and

easy insurance with no medicals. But generally, you’re being given a price and not advice.

There are five factors to consider when it comes to direct marketing insurance.

be wary of direct marketing insurance

1. CoST

In most cases, direct cover is funded

from your own cash flow. It’s often more

expensive than an adviser-sourced

product. An adviser can work with you

and look at ways of paying for your cover

via superannuation, as well as using

linking options to reduce the total cost

to you.

2. FeATureS

Direct or industry funds generally offer basic

cover, but without many extra benefits.

Retail products tend to have a wider range

of features and built-in options that can be

tailored to your individual preferences and

budget.

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3. no meDiCALS

With no medicals, a direct insurer must

price higher in anticipation of the risks

associated with insuring the unknown.

Also, many direct insurers hide behind a

clause stating that ‘claims due to pre-

existing conditions are not valid’. So if

you haven’t discussed your pre-existing

conditions, you may be in trouble come

claim time. Alternatively, most products

recommended by an adviser will be

fully underwritten at application stage

(underwriting is the process of measuring

risk exposure and determining the

premium that needs to be charged to

insure that risk). This gives you peace of

mind knowing that you’re more likely to be

covered when you go to make a claim.

4. SPeeD

Direct insurance offers a quicker and more

convenient process, and there are good

reasons. Consulting with a professional

adviser takes time as they aim to research

and tailor insurance to your personal needs

andsituation.Heorsheneedstocomplete

paperwork, then have an underwriter assess

your application. Direct insurance often

represents a less personalised solution.

5. GuArAnTee oF PAyouT

Direct insurance usually offers no guarantee

that a payment will be made, as often these

policies are underwritten at the time of claim.

Retail insurance is generally underwritten up

front, which means the payout is guaranteed

providing there are no pre-existing medical

conditions that were intentionally not

disclosed to your adviser.

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avoid common insurance mistakes

1. Look CAreFuLLy AT your

exiSTinG SiTuATion

Many superannuation funds arrange Life,

TPD and Income Protection cover for

their members. If you’re reviewing your

life insurance, a good place to start is

to check the cover you get within your

super fund and compare it with other

insurance options. It’s always better to

have some life insurance rather than

none, but it’s wise to know exactly what

your insurance will or won’t pay, and in

what circumstances. Ask your super fund

about the details of your insurance or let

an adviser help you with the process.

2. be AwAre oF TAx beneFiTS

Buying insurance cover through your

superannuation fund can provide some

tax concessions that aren’t usually

available for policies held outside super.

However,youshouldneverselect

insurance based solely on tax benefits.

• Ifyoupaylifeinsurancefromyour

superannuation fund, you’ll pay only

15%taxonthefundsinyoursuperfund;

as opposed to paying life insurance

out of your pocket after incurring

your marginal tax rate (which, in most

circumstances,ishigherthan15%).

• TPDheldinsideasuperfundcanbe

a tax deduction to the fund, but TPD

held outside is not tax deductible by

anindividual.However,ifyou’repaying

your insurance as a company or a self-

employed individual, you may claim it as

a deductible business expense.

• Incomeprotectionpremiumsaretax

deductible whether inside or outside of

super.

• Traumainsuranceisnotallowedinthe

super environment and you can’t claim

tax deductions for this type of insurance.

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3. Seek inDePenDenT ADviCe

By helping to educate and inform you,

an adviser can make it easier to prioritise,

budget, select and review insurance products.

An independent financial adviser doesn’t

work for one particular insurance company.

Instead, they recommend insurance policies

from several companies.

There are four advantages of working with an independent insurance adviser:• More choices • Lower costs• Unbiased advice • Help with claims

4. Think iT ThrouGh

When you’re looking into insurance, think

aboutwhat’simportanttoyou.Howmuch

are you willing to put aside to cover the

risk if something were to happen to you –

permanently or temporarily? If something

were to happen, would you be able to afford

the following?

• Monthly mortgage repayments • Nurse for rehabilitation• Education for your kids • Your current lifestyle

The loss of income and increased medical

costs may force you to sell the family home

and other assets, or eat into your savings.

Your hopes of giving your children the right

start may falter, or little luxuries like holidays

may become impossible. Insurance is there

to cover you for these things.

5. be honeST

If you’re going to take out a retail insurance

policy and go through the process of

underwriting then the main thing is to be

honest. The reason insurers ask so many

questions is to get everything out in the

open from the start, so that you’re paying

premiums for a claimable policy. If you’ve

ever seen a medical practitioner about

any condition then it will come up on

your records. It’s better to acknowledge an

ailment than to lie about it.

6. be wAry oF DireCTLy mArkeTeD

inSurAnCe

As discussed above, direct marketing, TV

and internet comparison websites may

looktempting.However,shoppingbyprice

alone may result in inadequate cover and

create difficulties when it’s time for you to

make a claim. The underwriting process for

these types of insurance is done at claim

rather than when applying, this means you

could be paying premiums for cover you

are not eligible for.

Explore your options As we’ve discussed earlier, there are

several different types of insurances out

there. Understanding the characteristics

and purpose of each will help you

determine what’s most important to

you and exactly what cover you need

for total peace of mind.

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How are we different from your average financial planner?

Future Assist is independently owned and as

such has no institutional shareholders and

no investors such as banks or investment

groups. This means we are able to offer a

wider solution which focuses purely on your

strategy rather than a handful of products. We

have offices located in all eastern seaboard

states in Australia and provide flexible

consolations either at one of our offices,

at your home or via tele-consult. Our main

objective is to educate, explore and provide

strategic advice, not sell financial plans as

a means of distributing products. We are

motivated to help you find the right strategy

for you based on your goals, your needs and

your objectives. Your goals are our focus.

All strategies developed for our clients is

reviewed by a panel of experts with over

60+yearsofcollectiveindustryexperience

between them, some of these panel members

are external to future assist and sit on our

panel to promote greater balance of advice.

We take into consideration all aspects of

your life and develop a plan that will help you

achieve your goals. We are help thousands

of Australians each year keep on track to

reach their financial and retirement goals and

provide a better lifestyle for their family.

how we can help

Future Assist provides holistic financial planning, budgeting, investment, accounting, debt

consolidation and other financial services to customers throughout Australia. We are a

privatelyownedspecialistfinancialplanningfirm,employingapproximately100staffand

encompassing 7 specialist teams. We are committed to providing ‘whole of life’ wealth

management expertise to motivated Australians.

The information provided in this article general in nature only. It should not be used as the basis of any investment decision as it has not taken any person’s personal situation, needs, wants or goals into consideration.

Future Assist Financial Service Group Pty Ltd FSL No# 413674; ABN 24 151 337 843 recommends that you seek personal advice from an authorised adviser of an Australian Financial Services Licensee before making any investment decisions.

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