Tag Archives: Insurance

Who inherits your super?

By visual /May 13,2020/

There are only certain people who can inherit your super when you die. There are also two different types of nominations you can make. Here’s what you need to know before making your super beneficiary nomination.

Super is different from other assets, such as your house, because the trustee of your super fund ultimately decides who gets your super and any associated life insurance, if it’s held within the super fund, when you die.

Super doesn’t automatically go to your estate, so it’s not automatically included in your Will. That’s why you need to tell your super fund who you nominate. And, depending on the type of nomination, they’ll either consider your nomination or be bound to pay it as you’ve nominated.

Who can you nominate?

Super fund trustees can only pay your super to ‘eligible dependants’ or to the ‘legal personal representative’(LPR) of your estate.

Eligible dependants are restricted to these people:

Spouse

A spouse includes a legally married spouse or a de facto spouse, both same-sex and opposite-sex.

A spouse can be a person you’re legally married to but are now estranged or separated from. So, if you haven’t formally ended a marriage, your husband or wife is still considered your dependant under super law. And, while you can’t be legally married to two people, it’s still possible to have two spouses – a legally married spouse and a de facto spouse.

Child

A child includes an adopted child or a stepchild. Even though a stepchild is included in the definition of a child, if you end the relationship with the natural parent or the natural parent dies, the child is no longer considered your stepchild. However, they may still be considered a financial dependant or in an interdependency relationship with you and could therefore continue to be a beneficiary of your super.

Financial dependant

Generally, a person who is fully or partially financially dependant on you can be nominated as your super beneficiary. This is as long as the level of support you provide them is ‘necessary and relied upon’, so that if they didn’t receive it, they would be severely disadvantaged rather than merely being unable to afford a higher standard of living.

Interdependency relationship

Two people have an interdependency relationship if they live together and have a close personal relationship. One, or each of them, must also provide a level of financial support to the other and at least one or each of them needs to provide domestic and personal care to the other.

Two people may still have an interdependency relationship if they do not live together but have a close personal relationship. For example, if they’re separated due to disability or illness or due to a temporary absence, such as overseas employment.

Who is not a dependant?

A person is not a dependant if they are your parents, siblings or other friends and relatives who don’t live with you and who are not financially dependent on you or in an interdependency relationship with you. If you do not have a dependant you should elect for your super to be paid to your legal personal representative and prepare a Will which outlines your wishes.

Legal personal representative

A legal personal representative (LPR) is the person responsible for ensuring that various tasks are carried out on your behalf when you die. You can nominate an LPR by naming the person as the executor of your Will. Your Will should outline the proportions and the people you wish your estate, including your super, to go to.

Types of nominations

There are two types of nominations you can make once you decide which super dependants, or LPR, you wish to nominate:

1. Non-binding death benefit nomination

A non-binding death nomination is an expression of your wishes and the trustee will consider who you’ve nominated but they’ll ultimately make the final decision about who receives your super and any associated life insurance.

2. Binding death benefit nomination

A binding nomination means the trustee is bound by your nomination. They must pay your super benefits to your nominated dependants in the proportions you set out or pay it to your estate if you nominated an LPR. Binding nominations need to be signed and witnessed by two witnesses who are not named as beneficiaries. Also, they expire after three years unless you re-affirm your nomination.

If you’re not sure of the best way to nominate your super beneficiaries, or to discuss your situation in further detail, please contact us.

Source: IOOF

6 misconceptions about life insurance

By Robert Wright /April 05,2019/

The probability of you developing a serious illness or getting involved in an accident so severe you’re unable to work, may seem highly unlikely… until something happens.

It’s often small events that remind us we’re not completely in control of these possibilities, which is exactly what life insurance is for.

Unfortunately, there are a lot of misconceptions about life insurance which can lead to missed opportunities to protect ourselves and our dependants.

In this article, we’ll set the record straight for six of them.

1. You don’t need insurance if you don’t have dependants

If you don’t have anyone financially depending on you, you may be under the impression that you don’t need life insurance, but it’s not always the case. There are other financial commitments which could make it worth considering.

For example, if you fall sick or become injured for an extended period of time and are unable to work, you’ll still need to meet day-to-day expenses.  Having Income Protection may therefore help you in covering a portion of your income.

2. Life insurance is set-and-forget

Unfortunately, it’s not enough to stuff your life insurance policy in a drawer and forget about it.

Adjusting your policy is extremely important as your needs change. If you decide to reduce your level of cover though, make sure you’re not leaving yourself exposed. For instance, even if your children are no longer financially dependent on you, your spouse may still need financial support if you were to pass away. Reducing the total amount your cover could also place you at risk if it’s not keeping up with inflation.

Speaking to a financial adviser can help you determine how much cover you actually need, if you are considering reviewing your life insurance.

3. Naming your child as a beneficiary is a good option

If you name your child or grandchild as your primary life insurance beneficiary, complications can arise if you pass away before they turn 18.

In most circumstances, if your child is under the age of 18, the courts will appoint a guardian or custodian to look after how the money is managed. Restrictions, legal fees and other costs may take a significant amount of your life insurance proceeds, at your child’s expense.

A solution you could consider is to set up a trust on behalf of your dependants, which you can name as the recipient of your life insurance proceeds. This can provide financial security for those who can’t or don’t want to handle large sums of money or other assets.

4. You don’t need insurance because you’ve paid off your debts

While your need for life insurance may reduce once your kids have grown up and you’ve paid off your debt, it’s still worth considering it to cover things like everyday living expenses, any outstanding debts, medical and funeral costs.

Rather than removing it completely, you may therefore need to simply reduce it, depending on your needs.

5. You’ve got life insurance covered through super

Many super funds offer life insurance cover which is often cheaper than being insured outside of super. Your premiums are also deducted directly from your super rather than a bank account and there are some tax benefits too.

But it is possible that the amount of life insurance cover you have available through super, may not be sufficient for your needs.

So if you’re unsure about it, consider finding out exactly what you could receive if you were to make a claim and compare this to what you actually need. Your super fund or a financial adviser can help you with this.

6. You only need to insure yourself if you’re the breadwinner

If a dependant, such your spouse or child falls sick, you want to ensure that you’re able to care for them.

Child cover for example, can provide a lump sum if your child suffers a serious illness or injury (refer to the product PDS to see if this is an option and what it covers). The money may also help you take time off work to focus on what matters most.

Of course, there is an added expense to insuring your family members under your policy, so consider whether it is worthwhile.

Source: BT, March 2019

Poor consumer outcomes for direct insurance

By Robert Wright /February 14,2019/

No doubt you’ve seen the ads; “apply over the phone in a single call with no medicals or blood tests”, “cash back after no claim for 12 months”.

Direct insurance may seem simple and easy to obtain. However, some things to consider before picking up the phone:

– How do you know the insurance is right for you? Is it enough? Is it too much?

– Is the ownership structure correct?

– Have you disclosed any existing medical conditions?

This last point is crucial. Most direct insurance policies are underwritten by the insurer at the time of claim. This can provide a false sense of security that the insured believes they are covered when this is not the case. Pre-existing medical conditions may make your cover invalid.

A qualified, experience Financial Planner has an obligation to ensure the recommended insurance is appropriate and relevant to your circumstances. In addition, the insurance application will be underwritten at the time of application. Yes, this can sometimes result in the application being declined, exclusions or conditions being placed on the policy or a premium loading being applied for health reasons. But at least you are aware, and you know what you are insured for…..no nasty surprises at the time of claim!

Before picking up the phone, I encourage you to take a minute to read the attached flyer.

Poor Consumer Outcomes for Direct Insurance

Getting personal insurance right

By Robert Wright /November 16,2018/

With recent media coverage about insurance sales tactics, many Aussies might be concerned they’re being sold personal insurance policies – life, total and permanent disablement (TPD) and income protection – they don’t really need.

The fact that some Australians with multiple super accounts are likely to have duplicate personal insurance policies, is also putting the question of adequate insurance into the spotlight. After all, no-one wants to be paying for something they won’t benefit from.

Are Australians over or underinsured?

By focussing on problems with how insurance is sold or the issue of multiple policies through super, we’re overlooking the possibility that many Australians simply don’t have any one policy that will enable them to meet their financial obligations and maintain their lifestyle if the worst were to happen.

As a nation of people we’ve become more and more indebted in recent years. The latest Australian Bureau of Statistics data shows the average Australian household is servicing a high level of debt, thanks to both personal borrowing and home loans.

Average household debt has grown by 79% in real terms from 2003/4 to 2015/16 and this is largely because of borrowing to buy property. However, more households are burdened by credit card debt (55%) than a mortgage (34%).

According to a February 2018 report from Rice Warner, 94% of working Australians are likely to have some sort of life insurance policy in place, with an average estimated cover amount of $344,500. So it seems the majority of people will have something to fall back on in the event of their death. The report attributes this high incidence of cover to the introduction of compulsory default life cover by superannuation funds.

But it’s not only premature death that families need to worry about. With 81% holding a TPD policy and only one third of working individuals currently insured for income protection (IP), should people be taking out these policies to make sure they have all bases covered?

As the Rice Warner report highlights, insurance needs vary according to how many dependents you have and your age. They provide the following estimate of insurance needs for 30-year old parents with children:

• 8 times family income for life insurance on income replaced basis,
• 4 times family income for TPD insurance, and
• 85% of family income for IP insurance.

While these figures could be appropriate to one family’s situation, they may be way over the top or completely inadequate for another family.

At the end of the day, it’s really up to you how you budget for insurance cover – as a standalone policy or through your super fund. But what is worth doing is working out how much cover you need, and then comparing this with your current policy – whether it’s standalone or through super.

As the Rice Warner report points out, super fund trustees are having to make decisions about default insurance options based on their assumptions about general insurance needs. But those assumptions might not apply to you and your finances.

 

Source: FPA Money and Life