Insurance PlanningIf you were to pass away, would your family’s financial security be assured?

If you were disabled, in an accident or suffered from a long term illness, are you satisfied your income would be protected?

If you suffered from a critical illness, are you certain you have sufficient savings to see you through?

If you answered no to any of these questions, you need to minimise your risk.

There are two ways you can do this:

    1. Save

If your asset base can support you or your family if you pass away, or become injured or ill and cannot work, there may be a case to say that insurance isn’t necessary or at least not as essential.

    1. Insure

If you are not in this position, your financial security is at risk and your risk plan should include insurance.

General Insurance
One of the keys to wealth accumulation is structure. Apart from the asset protection benefits of using the correct structure, you need to understand the impact taxation will have on your returns, which has a significant effect on the long term value of your assets.

Personal Insurance
The idea of personal insurance is to protect your family’s assets and income to ensure they have the ability to make the best choices. There are five main types of personal insurance that should be considered in any Risk Plan:

  1. Term Life
  2. Total and Permanent Disablement
  3. Critical Illness
  4. Income Protection
  5. Health

The below information discusses these types of *insurance products, how they fit within a Financially Well Organised strategy and address the issue of Risk Management.

*Prior to purchasing any insurance product, you should seek advice from an adviser authorised to provide advice under an Australian Financial Services Licence who will take into consideration your personal circumstances.

Term Life Insurance
A term life insurance policy will provide a lump sum payout if you pass away.

When determining how much insurance you need, you should consider:

Once you are clear on what you want to happen to ensure your family is financially secure, it’s a matter of working backwards to determine how much insurance you need. There is no simple formula as everyone’s situation is different.

The next question you need to ask yourself is, “Who should own the policy?”

There are generally two options for policy ownership:

  1. Within superannuation
  2. Outside superannuation

There are two main benefits of owning the policy within the superannuation environment:

Total and Permanent Disablement (TPD)
This type of personal insurance covers you if can no longer work and depending on your policy terms, could either be any occupation or your own occupation.

The proceeds are paid out as a lump sum. A review of TPD policy definitions needs to be undertaken to ensure the policy payout definitions match your expectations and circumstances.

For example, if you can no longer work in your chosen career, but can still work in another job, the policy definition may not trigger the payout of the policy.

Therefore some of the issues that need to be considered include:

There are some other traps to be careful of with TPD, when the policy is owned within a superannuation fund:

Critical Illness Insurance
This type of personal insurance provides you with a lump sum payout in the event of critical illness. Examples of critical illness include heart attack, stroke, cancer and other major traumas.

Your income should be covered by your income protection policy, but this will not cover everything. Sometimes there can be significant out of pocket medical expenses, depending on the condition you have suffered, or you may need to release some financial burden by paying out loans or needing additional care. Critical illness cover is designed to assist you in these times. However, there is no tax deductibility for critical illness insurance.

Income Protection Insurance
Income protection or accident and sickness insurance provides you with 75% of your income – paid to you on an ongoing basis and usually up to the age of 65 – if you are ill and cannot go back to work.

Some of the traps to be aware of when taking out your policy are:

Health Insurance
The last of the personal insurances is health insurance. This insurance is designed to cover our medical expenses when using private medical services. It covers hospital and extras such as physiotherapy, chiropractic, psychology, and so on. Health insurance is a personal choice. However, higher income earners pay additional tax if they do not have private health insurance.

Tips for your Risk Management Plan:

Call us on 07 3833 3999 if you have any questions about your family’s financial security.