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Insurance

Protecting for your loved ones

Protecting for your loved ones

Financial protection for your loved ones when you die

Sudden death can place financial stress on those who depend on you. If this happens, life cover can help them pay the bills and other living expenses.

What is life cover?

Life cover is also called ‘term life insurance’ or ‘death cover’. It pays a lump sum amount of money when you die. The money goes to the people you nominate as beneficiaries on the policy. If you haven’t named a beneficiary, the super trustee or your estate decides where the money goes.

Life cover may also come with terminal illness cover. This pays a lump sum if you’re diagnosed with a terminal illness with a limited life expectancy.

Accidental death insurance is different from life cover. It will only payout if you die from an accident. It will not provide cover if you die from an illness, disease or suicide. This type of cover often has a lot of exclusions.

To understand what’s covered under a policy and the exclusions, read the Product Disclosure Statement (PDS).

Decide if you need life cover

If you have a partner or dependents, life insurance can help repay debt and cover living costs if you die.

If you don’t have a partner or people who depend on you financially, you may not need life cover. But consider getting trauma insuranceincome protection insurance or total and permanent disability (TPD) insurance in case you get sick or injured.

How much life cover you might need?

To decide how much life cover to get, consider how much money you or your family would:

  • need — to pay the mortgage, credit cards and any other debts, childcare, school fees and ongoing living expenses.
  • receive — from super, savings, the sale of any investments, your paid leave balance, and support from your extended family.

The difference between these is the amount of cover you should get.

Use our Life insurance calculator

Work out if you need life insurance and how much cover you might need.

If you need help deciding if you need life cover, reach out to the Sherlock Wealth team for assistance here.

How to buy life cover

Check if you already hold life insurance through super. Most super funds offer default life cover that’s cheaper than buying it directly. You can increase your level of cover through your super fund if you need to.

You can also buy life cover from:

  • a financial adviser
  • an insurance broker.
  • an insurance company

Life cover can be bought on its own or packaged with trauma, TPD or income protection insurance. If it’s packaged, your life cover may be reduced by any amount paid on other claims in the package. Check the PDS or ask your insurer.

Before buying, renewing or switching insurance, check if the policy will cover you for claims associated with COVID-19.

Life cover premiums

You can generally choose to pay for life cover with either:

  • stepped premiums — recalculated at each policy renewal, usually increasing each year based on the higher chance of a claim as you age.
  • level premiums — charge a higher premium at the start of the policy, but changes to cost aren’t based on your age so increases happen more slowly over time.

Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.

Compare life cover.

Once you know how much life cover you need, shop around, and compare:

  • benefits and policy features
  • exclusions
  • waiting periods before you can claim.
  • limits on cover
  • the cost of the premiums — now and in the future

A cheaper policy may have more exclusions, or it may become more expensive in the future. You can find information about the policy on the insurer’s website or in the Product Disclosure Statement (PDS).

Use our Life insurance claims comparison tool

Compare how long it takes different insurers to pay a life cover claim and the percentage of claims they pay out.

What you need to tell your insurer

You need to tell your insurer anything that could affect their decision to insure you. You need to give them this information when you apply, renew or change your level of cover.

Insurers usually ask for information about your:

  • age
  • job
  • medical history
  • family history, such as a history of disease
  • lifestyle (for example, if you’re a smoker)
  • high-risk sports or hobbies (such as skydiving)

If an insurer doesn’t ask for your medical history, it may mean that the policy has more exclusions.

The information you provide will help the insurer to decide:

  • if they should insure you
  • how much your premiums will be.
  • terms and conditions for your policy

It is important that you answer the questions honestly. Providing misleading answers could lead an insurer to deny a claim you make.

Making a life cover claim

If someone close to you dies and you need to make a claim, or if you need to make a terminal illness claim, see how to make a life insurance claim.

If you would like help reviewing or selecting appropriate life insurance cover, please reach out to the Sherlock Wealth team here to help you look at what’s right for you.

 

Source: MoneySmart
(ASIC)

Choosing an income protection policy

Choosing an income protection policy

MoneySmart
(ASIC)

Some of the things you’ll need to consider when choosing an income protection policy are:

Policy type

Income protection policies are provided as either an:

  • Indemnity value policy — the amount you’re insured for is a percentage of your salary when you make a claim. If your salary has decreased since you bought the policy, you’ll get a smaller monthly insurance payment. Indemnity value policies are generally cheaper and can be useful for people with a stable income.
  • Agreed value policy — the amount you’re insured for is a percentage of an agreed amount when you sign up for the policy. These are generally more expensive but can be useful if you have income that changes from year to year.

Waiting period

This is the amount of time you must wait before your payments start. Most income protection policies offer a waiting period between 14 days and two years.

In general, the longer the waiting period, the cheaper the policy. When you’re choosing the waiting period, think about how much you have in sick and annual leave, savings and emergency funds.

Benefit period

The benefit period is how long the monthly payments will last. Most income protection policies offer two or five years, or up to a specific age (such as 65). The longer the benefit period, the more expensive the policy. But it also means greater protection if you’re unable to work for a longer time.

Stepped or level premiums

You can generally choose to pay for income protection insurance with either:

  • Stepped premiums — recalculated at each policy renewal, usually increasing each year based on the higher chance of a claim as you age
  • Level premiums — charge a higher premium at the start of the policy, but changes to cost aren’t based on your age so increases happen more slowly over time

Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.

If you would like to discuss what income protection options are available for you, please reach out to the Sherlock Wealth team to discuss your unique situation here

Deciding if you need TPD insurance

Deciding if you need TPD insurance

Total and permanent disability (TPD) insurance

A permanent injury or illness can make it difficult or impossible to return work. TPD  insurance can provide a financial safety net to help support you and your family, and pay for medical and rehabilitation costs.

What TPD insurance covers

TPD insurance pays a lump sum if you become totally and permanently disabled because of illness or injury.

Each insurer has a different definition of what it means to be totally and permanently disabled. It can cover you for either:

  • Your own occupation — you’re unable to work again in the job you were working in before your disability. This cover is more expensive and is usually only available outside super.
  • Any occupation — you’re unable to ever work again in any job suited to your education, training or experience. This cover is cheaper but has a higher threshold to claim, so it’s less likely to payout.

Read the product disclosure statement (PDS) so you know how your insurer defines a total and permanent disability. Call the insurer or your super fund if you have questions about the policy.

Decide if you need TPD insurance

When deciding if you need TPD insurance, and how much, think about the expenses you’ll need to cover if you were permanently disabled and unable to work. These could include:

  • living expenses for you and your family
  • repaying debts such as a mortgage or credit card
  • medical and rehabilitation costs
  • savings you want for retirement

Also, think about what you have that could help pay for these costs. This could include:

The gap between the amount you have and the amount you’ll need can be a guide as to how much TPD cover you may need.

If you need help deciding if you need TPD insurance, and how much, speak to a financial adviser.

How to buy TPD insurance

Check if you already hold TPD insurance through your super. Most super funds offer default TPD cover that’s cheaper than buying it directly. You can increase your level of cover through your super fund if you need to.

You can also buy TPD insurance from:

  • a financial adviser
  • insurance broker
  • an insurance company

TPD insurance can be bought on its own or packaged with life cover. If it’s packaged, your life cover may be reduced by any amount paid out on a TPD claim. Check the PDS or ask your insurer.

Before buying, renewing or switching insurance, check if the policy will cover you for claims associated with COVID-19.

TPD insurance premiums

You can generally choose to pay for TPD insurance with either:

  • stepped premiums — recalculated at each policy renewal, usually increasing each year based on the higher chance of a claim as you age
  • level premiums — charge a higher premium at the start of the policy, but changes to cost aren’t based on your age so increases happen more slowly over time

Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.

Compare TPD insurance policies

Before you buy TPD insurance, compare policies to make sure you get the right one for you. Check:

  • if it covers ‘your own occupation’ or ‘any occupation’
  • exclusions
  • waiting periods before you can claim
  • limits on cover
  • premiums – now and in the future.

A cheaper policy may have more exclusions, or it may become more expensive in the future.

What you need to tell your insurer

You need to tell your insurer anything that could affect their decision to provide you with TPD insurance. You need to give them this information when you apply, renew or change your level of cover.

Insurers usually ask for information about your:

  • age
  • job
  • medical history
  • family history, such as a history of disease
  • lifestyle (for example, if you’re a smoker)
  • high-risk sports or hobbies (such as skydiving)

If an insurer doesn’t ask for your medical history, it may mean their policy has more exclusions or narrower policy definitions.

The information you provide will help the insurer to decide:

  • if they should insure you
  • how much your premiums will be
  • terms and conditions for your policy

It is important that you answer the questions honestly. Providing misleading answers could lead an insurer to decline a claim you make.

Please reach out to the Sherlock Wealth team to discuss what insurance cover you may need here.

MoneySmart
(ASIC)

Should I consider Income Protection insurance?

Do I earn enough for Income Protection

Income protection can be the financial safety net you need if you experience an accident or illness that means you can no longer work. A common misconception about income protection insurance is that it’s only for high-income earners, but this isn’t the case.

What is income protection insurance?

Income protection insurance is a source of income paid out to you if you are temporarily unable to work due to an illness or injury.

You can’t predict the future, but you can plan for it.

Nobody wants to consider an accident or illness impacting their health suddenly, but it’s always a possibility. As well as changing your lifestyle, an unexpected illness could mean you need to take an extended leave from work. In a 2020 report by the Australian Institute of Health and Welfare (AIHW) on an average day, 100 Australians suffer from a stroke that could leave them permanently out of work. The AIHW also reports that accidental falls were the most common cause of injury deaths. It’s tempting to think that if you lead a healthy lifestyle and make smart choices, you’ll be fine. But the reality is you can’t predict the future, you can only plan for it.

Why life insurance and income protection are not the same.

Then there’s the trap of thinking life insurance is all you need. An unexpected death is absolutely a part of life we should all plan for. But an unforeseen total or partial disability due to injury or illness is a debilitating situation that can stop you from earning a living and is equally unwise to overlook.

Do I need income protection if it’s included in my super?

Most super funds offer income protection insurance for their members which can be a cheaper option. But cheaper premiums can come with a limited level of cover. Moneysmart by the Australian Securities & Investments Commission notes that “insurance premiums through super are deducted from your super balance which reduces your savings for retirement” so it’s important to consider if separate income protection cover is right for you and your family’s needs. For more information on whether life insurance through superannuation is enough, read here.

What does income protection cover?

So, how does income protection insurance cover you? Up to 75% of your monthly income is provided for a nominated period to help keep your household up and running and provide for your loved ones while you recover. In a nutshell, it gives you the freedom to rest easy knowing you’ll be taken care of financially.

An inability to keep up with the mortgage, loan or credit card repayments can cause considerable stress when you’re unwell. It’s crucial to focus on recuperation at such a time, with full confidence that these debts can be provided for under your policy.

Your income is fundamental to achieving your financial goals, so for financial security, you should be confident that you have adequate protection and plans in place. To discuss your financial plan, or to take out cover to protect you and your loved ones if something unexpected did occur, please reach out to the Sherlock Wealth team to discuss your unique situation here

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it you should consider its appropriateness for you, having regard to those factors.

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