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.

Life Insurance

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