How much does it cost?
How Much Does It Cost?
The right level of insurance for you and your family may be more affordable than you first thought.
How The Costs Are Determined?
Typically insurance is viewed by many households as just another expense. But when life throws you a curveball, your cover can give you a financial lifeline. The great news is that insurance could cost less than you thought. There’s a range of different factors to determining the cost of insurance, such as but not limited to, your age, the sum insured, health, location, claims history, the person to be insured and many other factors depending on the risk.
Death cover could cost as little as $2.50 per day for an insured amount of $750,000.
Total and Permanent Disability (TPD) insurance of $750,000 cover for potentially $4.40 per day.
Trauma Cover, pay from around $3.00 per day for $200,00 Trauma cover.
Income Protection Insurance, from around $2.80 per day for cover worth $3,000 per month.
Insurance cost based on Term Life cover for a 45 year old, non-smoking male, living in NSW, paying a stepped annual premium based on our underwriting rates as at June 2016. – the cost of insurance will depend on your individual circumstances and insurance needs, so speak with your adviser for more information.
Income protection case study
The following scenario is illustrative only to demonstrate the importance of insurance and is not based on an actual event.
John (47) and Jenny (46) recently purchased an investment property to aid towards a self-funded retirement as well as be in a position to help their son James (13) purchase his own property when he’s old enough. This meant taking out a 2nd mortgage, in order to protect the family, John decided to take out Income Protection Insurance.
During a regular Sunday morning trail bike ride with James, John fell of his motorbike and twisted his knee. What appeared to be a simple injury was more complicated than John initially thought as he actually ruptured his ACL and required reconstruction surgery followed by physiotherapy.
It meant John wasn’t able to work for over 8 months, and while his boss could understand this was a tough time, John only had 4 weeks of sick leave owing to him. Thankfully, John’s Income Protection Insurance meant he received a steady income equal to 80% of his regular wage (including super).
The family had to adjust their budget a little until John was back on his feet but they were able to keep up with both of the mortgage repayments, which wouldn’t have been possible without John’s Income Protection cover.
Insurance is about the balance between protecting what you have now and what you will need in an unforeseen event.
Figuring out what is right for your needs.
The level of cover you will need is likely to change throughout your life, the secret to finding the right insurance is to understand your current needs and ensuring you have the right level and type of cover.
A good way to waste money is to over-insure yourself, but the flip side of having too little insurance in place is a financial risk.
Types of Insurance Important to Each Life Stage.
The beginning; early in your career you will most likely realise that valuable assets such as your car need to be insured. However you may not realise your most important asset is your ability to earn an income over your lifetime. As you get older and your level of income increases you take on more debt, such as a home loan, investment loans, it becomes crucial to adjust your insured amounts to reflect the right amount of your income and possibly life cover.
Life and TPD become essential once you have a partner and potentially a new family. It’s especially important for your family’s financial security if you were to become permanently disabled or pass away out of the blue. Both partners need to have appropriate life and TPD cover in place, not just the main income earner.
Financial expenditure is usually at its peak when raising a family, increasing the importance of income protection. The older you get the chances of experiencing serious medical conditions such as coronary attacks or cancer increase, making Trauma cover worthwhile. Trauma cover will pay a lump sum benefit to help with medical and other costs in the event of a serious illness.
Retirement is further away than ever for most Australians as we choose to work until much later in life than before, income protection insurance is required up until the day you throw away your work boots. The kids may have grown up and are experiencing the world on their own, life insurance can still play a crucial part.
Insurance In Super
An affordable, easy option is to set up insurance through super as most Aussies are set up with a superannuation fund.
Most of Australia’s superannuation funds provide automatic life insurance while some funds allow you to nominate the level of cover you would like. Either way, it’s a wise move to check if you even have cover, and if you do how much is in place. Setting up insurance through super means you don’t have to use your hard earned cash to pay for the cover, it allows the premiums to be taken from your super account, representing good value and the potential to be very tax-friendly (but always check with your accountant). This is an affordable way to have insurance in place if you don’t have excess funds, however it requires you to use your retirement savings to fund the cover.
What level of cover do you have?
It’s important to make sure that the level of cover you have with your super fund is adequate for you and your family’s needs. It should be easy to increase your insurance if it looks as though the level of cover in place is not adequate by simply contact your super fund. There’s a possibility that your cover is unit based meaning as you get older the cover amount shrinks. Keep in mind, there may be complications if you change super funds if you have purchased insurance through your super. Cancellation of your insurance cover is a big possibility, as well as the terms of insurance offered from your new fund may be different to what you previously had. Your level of cover and premiums could be affected, as well as you may be underinsured if you change super funds. Your Financial Adviser will be able to assist you avoiding this issues if you’re thinking about changing super funds.
If your cover is set up through your super fund, it’s essential to have a binding beneficiary nomination in place that states exactly how much and to who you would like the benefits from your life cover and your super fund to go to if you pass away.
When insurance is held in super, the benefits payable are subject to superannuation law, which means a condition of release has to be met before the trustee of the superannuation fund can release the payment. The tax implications of benefit payments are complicated, so it’s wise to consult with a Financial Adviser about your best options.
With the incorrect structure you may not receive any benefits in your own name or you may have to pay a large amount of tax on your disability benefit; due to strict superannuation laws and regulations this can make it very difficult for you to access your benefit money in your superannuation fund, your benefit money may not make it your desired dependant or you may have to pay tax on your benefit money!
For More Information
As our website contains general advice you might require further consultation to help secure a financial future that suits your unique situation. Please contact our office today to make an appointment time convenient to you. Phone: (03) 9633 7180