INSURANCE
ANSWERS
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Understanding insurance | |
The system of insurance and sharing risks is sophisticated and only available to those who buy it with health and pay cost with money. Membership of the "club of insureds" is restricted to those who bought their membership while they were eligible to join. What's more, your contracts prove that you have accepted your role and understand your importance to yourself and your family. |
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No, you are not worth more dead than alive ! | |
So often people say the words "I am worth more dead than alive". These words are often declared when requested to reconsider their sums insured in the light of new circumstances. These words are mostly an attempt to say "I will need a lot of convincing before I spend more on insurance". Don’t simply look at the amount of cover that you have without considering all the facts. Ask yourself the following: How much do I owe ? What security (signatures) have I provided for my business and relatives ? If I have left an asset that must be sold before it may be of transferred to multiple beneficiaries, have I considered the Capital Gains Tax that my beneficiaries will be required to pay ? Have I considered the Capital Gains Tax that my Estate will be required to pay on assets I have bequeathed to charities ? How much regular income will my family need and for what period will it be required ? What interest rate is available today and for what period could I secure a good rate ? What is the current inflation rate and will the asset that I leave be able to combat the ravages of inflation for a good period of time ? Have I considered the cost of an emergency such as the illness of a family member ? |
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Your life insurance may be worthless if it gets to the wrong beneficiaries or it may be worth less, if payment is delayed because you failed to update your beneficiary appointments. | |
Here are some relevant questions for you: Who are my beneficiaries under my superannuation fund and ordinary policies and have I advised the various trustees ? When I last changed a debit authority and the bank account details, did I consider that the purpose for which I set up the policy may have changed ? Am I paying the premiums for my ex partner’s or previous co-shareholder’s insurance cover ? Are the proceeds to be paid to my estate or directly to my financial dependants ? Will the trustee of my superannuation use his or her discretion regarding the payment of my superannuation benefits towards my dependants, irrespective of the instructions in my will ? Have I appointed beneficiaries under my policies rather than have the proceeds tied up in my estate while probate is arranged ? Have I considered the opportunities afforded to my dependants through a testamentary trust or receipt of my superannuation benefits as a pension ? |
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Does my will conflict with the appointment of beneficiaries under my policies and superannuation funds ? | |
If the cover and policy that you have is held within a superannuation fund, then it is most likely that the right people will receive the proceeds. This is because under most superannuation funds the trustees have the discretion and the obligation to distribute the proceeds in the first instance to your dependants. Even so, it is advisable to assist the trustees by giving them direction and guidance as to how you wish your benefits to be distributed. This may be done by appointing your intended beneficiaries and stating the method payment and proportion of the distribution. |
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Do my parents know that that they may be entitled to some of these opportunities for the benefit of all of their grandchildren ? | |
There is a host of information on this internet site that should be sent to your parents. Raising this subject with your parents about these affairs is not easy however, they will appreciate a print out of these pages or, if they have an internet connection, send them our site address. |
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Every-one should have an Enduring Power of Attorney. | |
More questions you should ask: If I become disabled and I am unable to conduct my affairs, have I arranged an "Enduring Power of Attorney" for a trusted individual to handle my affairs ? Have I considered this aspect in respect of my parents and spouse rather than have an unknown public trustee or court handle their affairs ? |
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Do I have a valid Will or will my spouse simply be treated through intestacy laws ? | |
Do I know that my spouse may not inherit my home if I die without a valid will, dying "intestate"? Your will is set up to direct to whom you wish your assets to be passed on the event of your death. Don’t assume that intestacy legislation is fair. Every estate is different and every dependant has unique requirements. It is very difficult to equalize an estate through a will. This should be arranged together with your solicitor, accountant and your insurance adviser. |
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What are the most undetected dangers to my dependants ? | |
Income tax liabilities, guarantees, business liabilities, unsettled agreements, disputes and claims. Have I considered that a claim for debts and outstanding contracts will delay settlement and cause substantial hardship to my dependants ? Have I considered that if my business cannot pay its debts or cannot afford to remain an ongoing concern, that my estate may fall liable and my dependants may suffer the consequences ? |
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You could substantially increase, and in some cases almost double the amount of your life cover, by obtaining a tax deduction for the premiums that you pay. | |
For more information contact us |
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Do you receive a tax deduction for the cost of your life assurances? | |
For more information contact us |
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Facts, Figures and Inflation | |
At a 6% p.a. return you need $486,000 to leave your family an income of $40,000 for 20 years. At a 6% p.a. return with 3% inflation you need $617,000 to leave your family an income of $40,000 for 20 years. Always consider the impact inflation may have on your family’s income. |
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Don’t call your accident policy "life insurance". The chances are you have made a mistake. | |
Often clients think that they have a life policy purchased through a special offering, often without any health questions. It is often discovered that the policy is a simple accident policy and no cover is in place in the event of death by natural causes. |
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Travel policies are essential but, have you considered that... | |
Your life is worth the same whether you die while you are on holiday or at home. Most travel policies today exclude certain hazardous causes such as terrorism. This is not to say that you will not have certain exclusions under your life policies however, we urge you to check the facts and consider that death by natural causes, other than by accident, is also a risk. |
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Prevention is better than cure. | |
Loss of income may occur through disability, death or retirement. There is no cure for it but the potential financial loss may be prevented through insurance and savings. Those people who have adequate income yielding investments are self insured but, how much is adequate ? Remember that your home does not provide income to you and your family. Survivors of major illnesses can have their hard earned savings devastated and their family's futures and aspirations ruined through unexpected medical costs. Always consider the impact of inflation. |
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Why disability insurance ? | |
You and your family rely on your income. Your asset base is built upon the ability to generate income. Your daily needs are met by your ability to pay for your fuel or bus ticket to get to work. Even your mental health and ability to cope with day to day demands depends upon your ability to earn. Please take a moment... take a deep breath and think about it. What would you do without your income ? How long could you last without it ? Ever had a friend call you from a hospital bed ? Ever thought about how the family of a disabled person is going to survive ?. What have you done to ensure that you and your family can deal with the financial obstacles that a disability will cause ? |
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Considering replacing your existing income protection policy ? | |
Before you attempt to replace your income protection policy to obtain a rate reduction, you need to consider the terms and conditions of the new policy that you are intending to take up. You may well discover that many of the benefits that you have in your current policy are irreplaceable. Should you consider to rather adjust your current policy? With the advances made with medical treatments and medications, people are living longer than we ever believed they would live. Income protection claims are dragging out far longer than originally expected. Underwriters never thought that critical illnesses would result in such long term claims. Most insurers no longer offer lifetime income protection benefits. Income earned at the time of the claim can often be well below what the insurer originally guaranteed, this can lead to the actual benefit paid being less that expected under indemnity contracts. Policies with agreed sums insured generally have far greater stringent underwriting requirements, higher premiums and often are not available to all occupations. So forgoing an older policy for a new contract may have dire consequences in the event of a claim. |
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Before altering your income protection policy... | |
Carefully consider the cover and benefits under your existing income protection policy. Increasing the waiting period from say one to three months will substantially reduce the premiums. Examine your occupation and pastimes. You may be eligible for a reduced premium if your occupation is now less hazardous or you have given up a hazardous sport. Reducing the benefit to a lower amount rather than canceling the policy, can reduce costs without entirely losing the insurance because premium costs have become too expensive. Examine your asset base and income yielding investments to establish if you require all of the cover that you currently hold. Always consider your health and employment conditions before you adjust your existing contract. You may be re-rated for adverse health or a because you are now in a more risky occupation. |
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Important tips | |
Total & Permanent Disability benefits: May not become payable where there is hope of recovery. May not pay for a partial or temporary disability. May not pay for own occupation. Check you contract as most definitions require you to be disabled so as not to be able to perform any occupation and will only consider your claim after a 6 month period of disability. Remember that Income Protection benefits will cease when you are well enough to work, even though you may have not be able to find work or immediately get your business generating income again. A combination of Income Protection, Trauma and Total and Permanent Disability Insurance, may hedge against these risks. Total and Permanent Disability Benefits are an excellent top up for Income Protection, especially when your policy includes an "own Occupation" definition. Please contact us for more information |
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