Life insurance for family and home

Should I put insurance inside or outside of super?

If you’re reviewing your life insurance, check what cover you have through your super fund so you can compare it with other options. Like all insurance policies, when you have insurance inside super you will pay insurance premiums. However, if your insurance is through your super fund, the premiums are deducted from your super account balance, rather than being paid out of your household budget. But is putting insurance into super a good idea? As with anything, there are pros and cons, and we’ve compiled a list of the major considerations for you.

You can be covered even if you can’t afford it

If money is tight, putting insurance inside of super will help your cash flow. We have 9.5 per cent of our income going into super that we can’t touch, so it’s a good source of funds to pay for insurance when you otherwise can’t afford it. However, keep in mind that the insurance premiums will be eroding your retirement savings, so if possible, put a little more into your super to cover for it.

It may cost you less

It’s often cheaper to have insurance inside of super because super funds purchase insurance policies in bulk and can pass the savings on to members. Be careful though, not all insurance policies are the same and just because it’s cheaper doesn’t mean it’s better.

It can be more tax effective

Term Life and Total and Permanent Disablement (TPD) insurance is typically not tax deductible. However, your super fund can claim a tax deduction on these insurances. Furthermore, the money in your super fund is contributed before tax. This means you received a tax deduction for this money in the first place, so you’re really using pre-tax dollars to pay for your insurance. However, keep in mind that insurance payouts from a super fund to your family may be taxable, and it’s also important to ensure that you’ve sorted out who your super beneficiary is.

You may get cover without a health check

Some super funds will allow automatic acceptance of a member to their insurance policy without being medically underwritten. The means they’re not going to ask you about your medical history which can make a massive difference if you have pre-existing medical conditions. Before you get too excited though, note there is usually a limit to how much insurance you can automatically get.

You might not get paid out

It’s possible that your super fund will be paid upon an insurable event, however it’s not guaranteed that your super fund will pay that money out to you. You must reach a condition of release, such as permanent or temporary incapacity, in addition to the insurance policy definitions. If you don’t meet a condition of superannuation release, the money will remain in your super fund and won’t be able to provide the financial support you may need during a difficult period.

 

Brenton Tong, director, Financial Spectrum

Family insurance

Do My Children Need Life Insurance Policies?

Any parent will attest, when it comes to their children, they want only the best for them. As each of our situations vary, what this looks like will of course differ from family to family and child to child.

So when it comes to the question of whether your children need life insurance, the answer isn’t always absolute one way or another. Individual circumstances will influence the relevance of a policy, so it’s important to understand what child life insurance is and the benefits a policy will offer.

Life insurance is typically held to protect the income and financial security of those with dependents who would be affected by a sudden change in circumstances. As children rarely have dependents or financial obligations (perhaps only as a child star) it can be argued there is little need for them to have life insurance.

That said, with the uncertainty of life, child life insurance offers a range of benefits should a child die, develop a terminal illness or suffer from a particular medical condition. The main benefit is financial, with a lump sum payment going to a family in the event of a claim.

This payment is invaluable to ease financial stress, covering medial expenses, loss of income if the parent needs to take time off work and other related costs.

Importantly, child life insurance can also provide cover for illness and disease that develop in late childhood/early adulthood that would rule out cover later in life. This includes chronic illness and diseases such as type 1 diabetes, epilepsy and cancer.

The purchase of child life insurance is also comparatively easier than other forms of insurance, and is simply added to an existing life insurance policy.

As parents it’s important to assess all options to ensure you provide the best for your children. Beyond the necessities of education, proper nutrition, healthcare and quality of life, there are other ways to safeguard against life’s unexpected events. Life insurance for your child can provide that extra level of comfort that makes certain your child will be supported no matter what circumstances lay ahead.

If life insurance for your child is something you are considering, your best course of action is to speak to your financial adviser,  as this information is general and does not take into account financial objectives, circumstances or needs.

What are the reasons you would consider taking out life insurance for your children?

Fact about life insurance

Facts of Life

Life insurance

Facts of Life #1:

One in five Australian families will experience unexpected death, accident or illness of a parent.
Source: Lifewise/NATSEM 2010

Facts of Life #2:

Over 95% of Australians do not have adequate levels of life insurance.
Source: Lifewise/NATSEM study, 2010

Facts of Life #3:

Just over one third of all deaths in Australia are due to heart disease.
Source: AIHW (2011) Cardiovascular disease: Australian facts 2011, Cardiovascular disease series no. 35, Cat. no. CVD 53, Canberra

Facts of Life #4:

One third of women and one quarter of all men will suffer cancer in their lifetime.
Source: AIHW (2008) Cancer in Australia: an overview 2008, Cancer series no. 46, Cat. no. CAN 42, Canberra

Critical Illness insurance

Facts of Life #5:

One in five men and one in seven women will suffer a critical illness before age 64.
Source: Rice Warner Report on Underinsurance in Australia 2011

Facts of Life #6:

About 88% of stroke survivors live at home, most with a disability.
Source: National Stroke Foundation (2012) Facts, Figures and Statisticshttp://www.strokefoundation.com.au/blog/?tag=stroke-facts viewed 1 May 2012

Income Protection

Facts of Life #7:

Australians have a one in three chance of being diagnosed with cancer before age 75.
Source: AIHW (2008) Cancer in Australia: an overview 2008, Cancer series no. 46, Cat. no. CAN 42, Canberra

Facts of Life #8:

Over 60% of Australians will be disabled for more than one month during their working life.
25% will be disabled for more than three months.
Source: Fabrizio, E (2007) Australia & NZ Disability Income Experiencewww.actuaries.org/IAAHS/Colloquia/Cape_Town/Walker_-_Income_protection.pdf AIHW (2008) Cancer in Australia: an overview 2008, Cancer series no. 46, Cat. no. CAN 42, Canberra

Total and Permanent Disability insurance

Facts of Life #9:

TPD underinsurance costs the government an estimated $1.2 billion per year.
Source: Rice Warner 2011

Facts of Life #10:

Someone in Australia suffers a stroke roughly once every 10 minutes.
Source: Stroke Foundation (2011) Facts, Figures and Statistics, www.strokefoundation.com.au/blog/?tag=stroke-facts, viewed 12 March 2012

Facts of Life #11:

Around 2.6 million Australians under 65 are living with a physical disability.
Source: AIHW (2008) Australia’s health 2008, Cat. no. AUS 99, Canberra

Australians and insurance

Facts of Life #12:

On average, Australians score only 24 out of 100 when it comes to having the various forms life insurance needed to protect their families (life, disability, income protection and trauma/illness cover).
Source: TAL 2013 Financial Protection Index

Facts of Life #13:

Three in ten Australians (30%) say they do not have any form of personal life insurance (life, disability, income protection and trauma/illness cover).
Source: TAL 2013 Financial Protection Index

Facts of Life #14:

People with mortgages, children and those who consider themselves risk takers have the highest levels of financial protection through life insurance (life, disability, income protection and trauma/illness cover).
Source: TAL 2013 Financial Protection Index

Facts of Life #15:

43% of young Australians (Gen Y aged 25 to 34) say they have at least one form of life insurance while only 31% of baby boomers (aged 50 to 65) say they have at least one form of life space insurance.
Source: TAL 2013 Financial Protection Index

Bright side of protecting your family

Australians urged to look on the bright side of life (insurance)

Australians urged to look on the bright side of life (insurance)

A study conducted in the USA found that amongst 142 countries Australians rank in the top 20% for optimism. The academics behind this study suggested that optimism is linked to quality of life and factors such as education, income and, believe it or not genetics. Unfortunately this happy go lucky eternally optimistic outlook is at odds with the actual facts and figures around the incidence of illness and accidents in our country.

The stark reality is that the likelihood of experiencing debilitating illness is considerably higher than people might expect. The latest statistics from the Australian Bureau of Statistics paints a bleak picture with long term health conditions such as arthritis, mental illness and heart disease affecting more than seven million people. The Australian Institute of Health and Welfare has also estimated that as many as three in four Aussies are diagnosed with a serious illness in their working lives.

The statistics relating to accidents suggest that optimistic Aussies are also grossly underestimating their chances of suffering an accident that might prevent them from working. A report issued by the Australian Institute of Health and Welfare revealed that over a two year period alone, an estimated 50,000 people were injured in road accidents. Of these 36% were car occupants, 28% were motorcyclists, 18% were pedal cyclists and 8% were pedestrians.

So who foots the bill if someone is unlucky enough to get sick or injured and need an extended period of time off work? Your employer may cover this under paid medical leave but the legal requirement is capped at only 10 days. For those suffering long term disabilities, the current disability support pension amount stands at a maximum of $766.60 per fortnight for a single person or $585.50 for a member of a couple. The question is whether this amount will be sufficient to cover all the fixed expenses such as rent or mortgage payments and the high cost of living in Australia.

There are a number of life insurance products on the market that fill the void between short term paid medical leave and the limited Government assistance, helping people to meet their financial obligations should they find themselves off work for an extended period of time.

Critical illness insurance, also known as trauma insurance, will pay out a lump sum benefit in the event that you are diagnosed with a specified medical condition such as cancer, heart attack or stroke.

An income protection policy will provide a monthly benefit of up to 75% of a person’s salary in the event they suffer an illness or injury leaving them unable to work. Payments will be made for the duration set out in the policy.

Total and permanent disability insurance, otherwise known as TPD, pays out a lump sum benefit when you have been advised by a medical specialist that you will never work again due to ongoing illness or injury.

So whilst Australia continues to rank as one of the top nations for optimism, the possibilities of sustaining an injury or illness that would leave you unable to work are very real.

The reasons for insuring yourself and protecting your family and loved ones from the effects of illness or injury are compelling. For those who don’t take out insurance and fall ill or suffer an extensive injury the options are limited to the good will and generosity of family members, the assistance of the Government or dipping into any spare savings that may have accumulated.

Reason to have life insurance

No job, no life insurance, no problem?

No job, no life insurance, no problem? There is a misconception that life insurance and income protection are only for those with real or paid jobs. But if you ask any stay at home parent, they will probably tell you their unpaid graft feels very much like ‘real work’. And the research backs this up. A study has shown that stay at home parents work longer and harder than their gainfully employed and better paid partners. Read more