Insurance And Wealth Protection

Insurance And Wealth Protection

Life Insurance

Life or term life insurance pays out a lump sum if the policy holder dies before a pre-agreed date or ‘term’. With most term life policies, the term ends when the insured person reaches the age of 65. The lump sum is determined by the amount of the premium paid each month. It is also fixed and does not accrue over time so, no matter at what age you die, the lump sum payout remains the same.

With term life insurance, the life you’re insuring is yours. You can usually nominate a person or persons to benefit by receiving the lump sum payout which is meant to provide for your beneficiaries when you are no longer around. Most people choose their spouse, partner or surviving children and their beneficiaries. Ideally the lump sum will be enough to provide for the long-term financial requirements of your surviving family members.

However, life insurance isn’t just for the main salary earner. If you are a homemaker you should consider whether your partner would be able to run the household and keep down a full-time job after your death. Life insurance can therefore be invaluable for both partners in a relationship.

Buying personal insurances such as life and total and permanent disability cover through your superannuation fund may enable you to take advantage of a range of ‘up-front’ tax concessions that are generally not available when insuring outside super.

When you take out insurance, there are three ways you can pay your premiums:

  • A level premium based on your age when your cover commences. Your premiums will only vary if a change is made to the insurance company’s premium rates
  • A stepped premium that increases as you age
  • A decreasing cover where your premium stays the same each year while your benefit varies each year, depending on your age and the insurance company’s premium rates at the time

While stepped premiums are usually lower in the early years, level premiums can be a more cost-effective option if you continue the insurance over a longer period. The earlier you commence your cover on level premiums, the cheaper the total cost of premiums over the long term.

Australia has one of the highest life expectancies in the world and the average retirement length has increased accordingly. You may therefore need to plan for 20 to 30 years without the financial security of regular employment.

Frightening Facts & Statistics we should all consider when thinking about insurance

  • 60% of Australian families with dependants will run out of money within 12 months if the main income earner dies
  • 1 in 3 Australians could be disabled for more than three months before turning 65
  • Research in 2012 by the Cancer Council shows that one in two Australians will suffer cancer by age 85
  • Almost a third of Australians over 45 who retire early, do so due to ill health and injury

Before the age of 70:

  • 21% of men & 20% of women will be diagnosed with cancer
  • 12% of men & 4% of women will suffer a heart attack
  • 4% of men and 3% of women will suffer a stroke
  • 15% of men and 14% of women will suffer another type of critical illness not mentioned
  • 7% of men and 1% of women will die from something other than a critical illness
  • 41% of men and 58% of women will not have suffered a critical illness

Source: MLC Website

Contact TAG Wealth today to find out how we can help you.

Children’s Life Insurance

Unfortunately children are also likely to have accidents and become seriously ill. When taking out your adult life insurance policy, you may be able to arrange cover for your children too.

Most children’s insurance policies allow you to change to an adult version when the child reaches a certain age – usually 18 – and all policies automatically expire on the insured’s twenty first birthday.

Peace of mind!
Children’s insurance policies will pay out a lump sum when the child insured dies or is diagnosed with one of a number of illnesses and medical conditions specified by the insurance company. These will differ between insurers but will usually include any terminal illness, cancer, brain damage, blindness, deafness, paralysis and serious burns.

What can the payout be used for?
Obviously looking after a very sick child is an emotional and even traumatic process which can involve ongoing medical expenses, the cost of carers, travel to and from medical appointments, special equipment and even alterations to the home. The payout sum can be used to offset all of these costs plus possible lack of income by one parent should they choose to give up full-time employment.

As with adult trauma insurance, it is virtually impossible to know when you will need to draw upon children’s life insurance. By their very nature, illness and accident can occur at any time.

To find out more about children’s life insurance and how it can help you through a particularly stressful time, contact the experts at TAG Wealth today.

Contact TAG Wealth today to find out how we can help you.

Income Protection Insurance

Most income protection insurance policies pay out monthly payments to replace your income should you become permanently or temporarily unable to work due to illness, injury or disability. You can usually choose how long you will need to wait before the benefit payments commence and how long it will be paid for. Choosing a longer waiting period, during which you have time to pay more in the way of premiums, and a shorter benefit payment period can reduce your premiums, in some cases significantly.

It may be that you have had an accident and it’s going to take months to recover, or maybe you can never work again through illness.

Most policies pay employees up to 75% of your net income either for a specified period or until you reach the age of 65. Income protection insurance policies can be held within a superannuation fund but the benefit period may be as little as 2 years! Employers and business owners can usually expect to receive ‘earnings after business expenses and before tax’ but some ancillary benefits are available to protect superannuation contributions.

There are two ways to purchase income protection insurance, ‘agreed value’ or ‘indemnity.’

With the agreed value option, you will be covered for the agreed value of your income at the time you take out the policy. The indemnity option means your payout will be based on your earnings for the 12 months immediately prior to making a claim. In both cases, premium payments are tax deductible but payouts are assessed as income.

Benefit payments may not start immediately after a claim is made. You may have to wait for as little as 14 days or as long as two years. When you take out the policy you can usually choose the waiting period. If you choose a long period, you must be certain you have enough money set aside in savings to see you through the first few months – or maybe a year.

Payments will be made for a certain period of time known as the benefit period. Once again, you can choose the benefit period for your policy.

Income Protection

income protection play

Trauma Insurance (Critical Illness Insurance)

Trauma insurance cover provides a lump sum payout on the diagnosis of a defined critical illness, for example cancer, heart conditions, strokes, multiple sclerosis, dementia, paralysis and diseases of the major organs.

If you’re diagnosed with a defined critical illness in your relevant insurance policy, trauma insurance can relieve your financial difficulties. Unlike income protection which is dependent on your inability to work, trauma cover aims to provide a payment on the diagnosis of the defined critical illness regardless of your working status.

Trauma insurance can be taken out as a separate policy or as part of a life insurance policy.

Of course, it is difficult to know how much trauma insurance anyone will require. You will need to estimate the potential cost of medical treatment, carers, changes to your home if you become wheelchair bound, compensation for the possible reduction in your partner’s income and, if you have income protection insurance, enough to cover the gap between 75% and 100% of your previous earnings.

Trauma insurance premiums are not tax deductible but the proceeds following a claim are tax-free.

Contact TAG Wealth today to find out how we can help you.

*Please seek personal financial advice prior to acting on this information.

Glens Story

TAG Finance Director, Glen Austen found out first hand the value of having trauma insurance in September 2011. His story is compelling - we're not invincible and, regardless of age, it's prudent to be prepared.

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Glen leaving the cancer ward

Total And Permanent Disability (TPD)

Total and Permanent Disability (TPD) cover usually pays a lump sum if you became totally and permanently disabled. It is usually purchased as an addition to term life cover, but can also be taken out separately or with trauma insurance. The definition of totally and permanently disabled involves a qualified doctor or medical specialist agreeing to the fact that you are unlikely to ever again engage in:

Your own occupation or any occupation to which you are suited by education, training and/or experience.

Home duties
Most insurance companies use these three options as official definitions of the cover you can choose. While the ‘own occupation’ option may be more beneficial, it can cost up to 50% more in premium payments than he ‘any occupation’ option. It is therefore important that you receive expert advice – both medical and financial – before deciding which policy option to take.

Contact TAG Wealth today to find out how we can help you.

Sam's Story

A Thailand holiday turned to tragedy for one woman and her family, but months after being told she’d never walk again, Sam Bloom is finding hope and providing inspiration.

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Glen leaving the cancer ward

Business Risk Insurance

Also known as business expenses insurance, this form of cover is only for business owners. If a business owner suffers an injury or illness that prevents them from running their business, they will receive a monthly payment usually for a maximum of one year after a claim is made.

As with income protection insurance, payments don’t start immediately but business owners can generally choose a waiting period of between 14 and 90 days. Generally speaking, the shorter the waiting period, the higher the premium.

Assuming that the illness or disability is not permanent, it is important to keep the business running wherever possible. The experts a TAG Wealth can advise business owners on ways to ensure that they have a business to go back to when they are fit and well.

Contact TAG Wealth today to find out how we can help you.

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