Previously, individuals could not access their superannuation until they had reached their preservation age and a condition of release had been satisfied (which was usually retirement from the work force).

Regulations were introduced in 2005 to give effect to the “Transition to Retirement” (TTR) measure which allows individuals to gain access to their superannuation benefits after reaching preservation age while still working and before a condition of release has been met.

Your preservation age is not the same as your pension age. Your preservation age is the age at which you can access your super and depends on when you were born. You can use this table to work out your preservation age.

The TTR measure allows individuals to commence a retirement income stream (i.e. account based pension) while still working. The retirement income stream commenced is non-commutable, which means that the balance cannot be accessed until a condition of release is satisfied. There is a minimum 4% or maximum 10% yearly pension income limit of the account balance, as at 1 July each year.

Commencing a TTR pension can be very tax effective as income and capital gains are tax free and the pension payments are concessionally taxed for those under age 60. Pension payments become tax free for those over age 60.

A popular strategy used by those who have reached their preservation age and intend to keep working has been to use a TTR pension to in fact increase their overall super nest egg whilst still maintaining their cash flow requirements.

This strategy involves:

• Arranging with your employer to sacrifice part of your pre-tax salary directly into your super fund,
• Convert most of your super into a TTR pension account, and
• Using the regular payments from the TTR to replace the income you sacrificed into super.

By taking these steps, it’s possible to accumulate more money for your retirement, due to a range of potential benefits. For example:

• Salary sacrifice super contributions are generally taxed at up to 15%, rather than at marginal rates of up to 49%,
• Investment earnings in a TTR are tax-free, whereas earnings in a super fund are generally taxed at a maximum rate of 15%, and
• The taxable income payments from the TTR pension will attract a 15% pension offset between preservation age and 60.

See how it works below:

Assumptions:

SPOILER ALERT! In the 2016 Federal Budget, the government proposed that from 1 July 2017, earnings from a TTR pension will no longer be tax-free. The earnings will be taxed at up to 15%, the same as if they were in accumulation phase. Whilst this proposed measure does take some of the gloss off the TTR strategy it is still a worthwhile strategy, but in more limited circumstances.

If you’re considering taking advantage of the TTR pension/salary sacrifice strategy, or considering reviewing an existing strategy, then we recommend you seek advice on the merits of such a strategy for your personal circumstances, especially the implications post-30 June 2017.

Are you interested in getting your TTR pension/salary sacrifice strategy reviewed or started? Contact us for your free initial consultation today, one of our friendly advisers would be delighted to speak with you.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s Individual objectives, financial situation or needs.  Before acting on anything in this article you should consider if it is appropriate for you, having regard to your objectives, financial situation and needs.

Changes to superannuation legislation was a key focus of the 2016 / 2017 Federal Budget.  The purpose of this article is to help explain some of the key changes and how they may apply to you.

1. Changes to concessional contributions

Concessional contributions are contributions made into superannuation for which a tax deduction is claimed; such as superannuation guarantee contributions (SGC) or salary sacrifice contributions.

From 1 July 2017, the concessional contributions cap will be reduced to $25,000 pa (indexed) for everyone, regardless of age.

On the positive side, individuals who have total superannuation savings of less than $500,000 who do not fully utilise the cap each year can carry forward the unused cap on a rolling five-year basis starting from 1 July 2018.

The cap is currently $30,000 per annum under age 50 and $35,000 for 50 and over.

2. Reduction of the non-concessional contributions (NCC) cap

Non-concessional contributions are made from after-tax money and are contributions for which no tax deduction has been claimed.

A cap of $100,000 per person will apply. If the individual is under age 65 the 3-year bring forward rule can be utilised, thus contributing up to $300,000.

For the 2016-17 financial year the existing limit of $180,000 per annum, or $540,000 3-year limit, can still be used. In order to access the full $540,000 limit, however, the individual must fully utilise this amount this financial year otherwise transitional bring forward rules will apply. If an individual has not fully used their bring forward limit before 1 July 2017, the remaining bring forward amount will be reassessed to reflect the new annual caps.

If the individual’s super balance is $1.6 million or greater then no further non-concessional contributions can be made. This restriction only applies to non-concessional contributions.

Previously individuals could make non-concessional contributions of up to $180,000 pa into their superannuation, with the ability of bringing forward two years’ allowances (i.e. $540,000 worth of contributions in total) if the individual is under age 65.

3. Introduction of a pension transfer cap of $1.6 million

A $1.6 million transfer balance cap on the total amount of super an individual can transfer into retirement accounts will apply. The cap will apply to current retirees and individuals yet to enter retirement.

Retirees with balances above $1.6m will be required to reduce their balance to the cap by the effective date by transferring any excess back to accumulation or withdrawing the excess from super. If not transferred, an excess tax will be applied at 15% initially and 30% for subsequent breaches of the cap.

The cap will index in increments of $100,000 in line with CPI.

There was previously no limit on the amount individuals could accumulate in pension phase.

A summary of all the reforms and when each measure will take effect from is provided in the table below.

Are you confused about these Superannuation budget changes? For your free initial consultation contact us today, one of our friendly advisers would be delighted to speak with you.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s Individual objectives, financial situation or needs.  Before acting on anything in this article you should consider if it is appropriate for you, having regard to your objectives, financial situation and needs.

It’s an exciting time when you find the property you want, and finally, have approval for the money required to buy it!  Because that’s the reality now, most of us rely on loans to fund our property purchases.

There are significant differences between Variable and Fixed-rate mortgages. There are also some hidden traps to look out for when comparing those loan offers, especially within this low-interest rate environment when Fixed Rate offers are being heavily promoted by lenders.

Always ensure you read the Terms and Conditions before signing on the dotted line, so you know exactly what you are getting yourself into, especially if you are thinking of paying your mortgage off sooner than the contract states.

You might think you’re protected should you need or want to get out of the loan contract. But when the federal government stepped in and banned exit fees on all new variable rate mortgages in 2011, fixed-rate mortgages were not included in the ban.

So, if you are planning on paying your mortgage off sooner than expected, a variable rate mortgage may be a more appropriate loan structure for you, or even better you could split the loan so you have the portion you know you can’t pay back for a period in the fixed portion of your loan, and the amount you believe you can pay back faster in the variable portion.

Fees to watch out for with Fixed Rate Mortgages:

Establishment fee

An establishment fee is a one-off payment when you start your loan. Usually ranging from $600 – $1,000.

Ongoing fee

An ongoing fee is charged every month or year for administering your loan – and this is usually around $10 a month.

Break cost fee 

Break cost fees, also known as exit fees, early repayment adjustment fees or prepayment fees, are charged if you make extra repayments on your loan, pay your loan off in full or decide to switch to another loan type such as a variable rate loan.

Most lenders will allow you to pay a small amount off your loan each year without being charged, this can range from $10,000 to $30,000, however, if you pay more than this amount you may incur a hefty fee.

How are break cost fees calculated?

They are essentially based on three factors: the length that remains on your loan, what interest rate you are paying (compared to your current lender’s current fixed rate), and the amount you initially borrowed. Break costs can run into the tens of thousands of dollars depending on how much interest rates have changed.

Discharge Fee 

A discharge fee, also known as a termination fee or settlement fee, will be charged when you pay your mortgage in full. This is normally $150 and covers the lender’s legal costs.

Purchasing property and using borrowed funds is a big financial commitment and therefore it is incredibly important that you seek independent legal and financial advice.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. If you would like more tailored advice, please contact us to speak with one of our mortgage brokers today.

With Australian household debt to income ratios at record highs, it is vital to ensure that you have adequate personal risk protection cover in place to provide security for your home loan.  It is also critically important to consider your cover needs if another family member has provided a guarantee to assist you in obtaining the loan.

Unfortunately, in the excitement of buying a home, very few prospective or existing borrowers consider the consequences of not being able to work due to sickness or accident, or the financial impact of death, particularly with loans held jointly with a spouse, or with an additional guarantor.

Loss of income in the event of disability, even for a short period, will place stress on the ability to meet mortgage and/or personal loan repayments, and day to day living expenses.  Without adequate Income Protection cover, you will erode savings, and risk falling behind in your mortgage payments.  If you default on your loan, the bank may commence legal proceedings to repossess your home or pursue a guarantor to seek payment of the liability.

In the event of the death of a borrower, the person who inherits the home, or is a surviving joint tenant will be responsible for the debt.  If the property owner was a sole borrower, the bank may request the payment of the outstanding loan amount.  If there is a shortfall in the sale price versus the loan amount, the bank may sue the beneficiary to recoup the balance of the loan.  Without adequate death cover in place, you may be putting your surviving family at risk!

Many homeowners falsely believe that they will have adequate protection via the default cover offered through their superannuation fund if they are temporarily unable to work, suffer permanent disability, or death.  Unfortunately, there is often a huge discrepancy between the amount owing on the average mortgage, and the cover held via super.

It is crucial to understand that the Death/Total and Permanent cover offered via many funds is unit based, and will decrease significantly as you get older.  The rate at which the cover reduces during your working life is typically much faster than the rate at which a mortgage is paid off!

The Income Protection cover offered by many superannuation funds may only offer a minimal benefit for a maximum period of 2 years, which in many cases will not cover mortgage payments in addition to other costs of living.  In the event of claiming on your Income Protection held via super, the benefit may be reduced based on your pre-disability earnings, and other offset provisions.

Some facts to consider in relation to covering your debts:

• For every home destroyed by fire, 3 are forced to be sold due to death, and 48 are forced to be sold due to disablement.

• 1 in 6 men and 1 in 4 women are expected to suffer a disability between the ages of 35 to 65 that causes a loss of 6 months or more off work.

• 2 out of 5 Australians will suffer a critical illness such as Cancer, Heart attack or stroke before they reach 65.

Here at The Investment Collective, we have friendly advisers who specialise in risk insurance. If you would like to review your personal cover requirements contact us today.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.

Today, more than ever, there’s a huge range of investments to consider. We want to be your partner in searching out great opportunities and bring our professional expertise and proven techniques within easy reach. We think you’ll agree that this is something well worth considering as part of your investment program.

The Capricorn Diversified Investment Fund (CDIF) has been specifically designed to be the perfect complement to the mainstream investments you’re familiar with, bringing additional spread and other benefits to your holdings. Its clear objectives make it easy for you to decide how suitable an investment it could be.

CDIF is a regulated, pooled investment unit trust offered to a limited number of people. There is no entry or exit fee and the on-going fee offers excellent value for money.

The role of the Capricorn Diversified Investment Fund is to complement other investments in your portfolio. It uses a variety of ways to do this.

Some investments are not feasible to own in an individual portfolio, for instance, because of large minimum investment requirements or liquidity issues. Also, some legitimate investment techniques are impractical and expensive to apply at the individual portfolio level. Enhancing income using options and risk management using hedging techniques are examples.

The pooled unit trust structure overcomes these problems and conveniently opens up a wider choice of investments and solutions tailored to your needs.

Adapting another’s slogan: “it’s the opportunities that Capricorn reject that make its Diversified Investment Fund the best”. The investment committee has extensive and varied skills and this along with a comprehensive evaluation process means a highly selective approach is applied to portfolio construction.

The Capricorn Diversified Investment Fund uses its own team of experts to identify and evaluate many investment opportunities. Some of these opportunities are sourced from contacts from within its own network and some are great ideas and techniques that other professionals have developed.

Looking for opportunities around the world as well as in our own backyard makes sense. Using techniques mastered by others as well as our own expertise provides an additional choice of solutions and spread of holdings. A completely open-minded attitude combined with a rigorous evaluation approach leads to the effective identification of potential opportunities and successful selection of those to pursue.

Your adviser can give you more details of how effective blending is achieved and examples of past investment opportunities that have been considered and rejected and considered and adopted

It’s important that you understand the objectives of the Capricorn Diversified Investment Fund so you can make a decision about including it in your portfolio. By the way, a holding of no more than 10% of your overall portfolio in this fund with an investment period of at least 5 years would be a general guide to its position.

The fund’s objectives are:

Consistent annual income distribution of 8% with quarterly distributions.

Low level of volatility compared with share markets.

Longer-term capital growth in line with inflation.

Contact The Investment Collective on today, to set up your free initial meeting to speak with one of our friendly advisers and learn more about CDIF.

The Capricorn Diversified Investment Fund is a registered scheme, number 139 774 646. CIP Licensing Limited is the Responsible Entity for the fund under Australian Financial Services Licence 471728. The issuer of securities in Capricorn Diversified Investment Fund is CIP Licensing Limited. Potential investors should consider the Product Disclosure Statement (PDS) is deciding whether to acquire or to continue to hold, units in the fund. Investments can only be made by completing the application form contained in the PDS available online or by calling The Investment Collective on 1800 679 000.

Recently we have been able to gain exposure for our clients to the wholesale corporate bond market. We see this as a great alternative to the recently issued bank preference shares as they are lower risk, and offer greater protection in the advent of a market downturn.

Firstly, what is a bond and how do they work?

A bond is simply a loan or an IOU from an investor to an issuer (such as the government, a bank or corporation). Think of the loan you take out from the bank to buy a house. The bank expects to be repaid interest and principal. If you fail to make the payments you break the contract and the bank has rights to recover its funds. Bonds work in much the same way. The investor agrees to lend money to the issuer who must then honour that legal obligation by paying back interest and principal. The interest payments (coupons) are typically made by the issuer twice a year and the principle is paid back at maturity.

Bonds are traded on a market much like shares and their price fluctuates from day to day. Generally speaking, we will aim to hold the bonds until maturity when they are paid back at face value – usually $100. As such, we are not overly concerned with the day to day fluctuations in price and holding bonds until maturity will also reduce brokerage as there will be no exit charge. If, however, an investor wants to sell their bonds before maturity they do expose themselves to the risk of selling below their purchase price and they will incur brokerage.

Different Types of Bonds:

Fixed Rate bonds – A fixed rate bond pays a fixed amount for the life of the bond, known as the coupon rate.

Floating rate bonds – A floating rate bond pays income linked to a variable benchmark. The margin over the benchmark is fixed and set when the bond is first issued, and income will rise and fall over time as the benchmark changes.

Inflation-linked bonds (ILBs) – An ILB is a security linked to the consumer price index (CPI) or inflation. Therefore the capital value of the bond grows with inflation.

Why Bonds?

Some key benefits of bonds include:

• Regular income – the bond’s interest accrues daily and is generally paid twice a year.
• Diversification – bonds provide a different type of return on shares and property.
• Liquidity – although it is our intention to hold the bonds until maturity, bonds can be bought and sold prior to maturity.
• The minimum investment for bonds is $10,000. This is much lower than a managed fund where the minimum is usually $20,000.
• Lower risk – many of the recent bank hybrids contain caveats that put the owners capital at risk in the advent of a downturn. These hybrids also do not allow the holder to be rewarded should the bank perform better than expected.

If you would like to learn more, please contact us today. One of our friendly advisers would be delighted to speak with you. Please note that the above has been provided as general advice, it has not taken into consideration your personal circumstances or financial goals.

The far right and the far left are equal in their attempts to inflame this Islamo-Christian divide, with the result that the ill-informed jump on a dangerous bandwagon.

My Facebook page is the recipient of dozens of admonitions and representations that someone or another is doing something bad to someone else.  Often ill-informed or downright kooky, there is no effective mechanism to knock out these damaging pronouncements, and simply commenting is, excuse the French, pissing into the wind.

Take the issue of Sharia Law for example.  Now I am no expert in the field, but first of all, it strikes me that the general take-home message behind Sharia Law is not that much different to that of the Old Testament.  The idea of “an eye for an eye” is found at Exodus 21.24.  In management, I am a big fan of it, just this week threatening a self-assured young employee that I’d “cut his balls off” if he stuffed up a second time on account of not listening to important instructions.  Not surprisingly his commitment to the task has grown exponentially, even with the availability of Western Anesthetic.

More seriously, Facebook posts are now focusing on Sharia Lending.  Apparently the Koran states,

“Those who charge riba are in the same position as those controlled by the devil’s influence… As for those who persist in riba, they incur Hell, wherein they abide forever” – Qur’an 2:275

Riba translates as usury, which is the action or practice of lending money at unreasonably high rates of interest.  Riba is therefore not interest, but the pricing and charging interest in a (supposedly) unfair or extortionate manner.  The pricing of interest in western markets is well institutionalised, and takes into account inflation and risk.  In a well-informed, competitive and well regulated market, it is near impossible to charge extortionate prices.  That is why in the west, we place so much importance on competition policy and consumer protection.

The translative subtlety between riba and interest has opened a loop-hole for Islamist scholars, many of whom have opted for a direct interpretation.  They say any interest is against Sharia law, because (they claim) it is a form of “effortless profit”, or extra earning that is “not the result of exchange”.  Such an interpretation is a careless application of the truth.  Whether as an individual or an intermediary, it is not effortless to accumulate money which can be lent out in the future.

And isn’t taking on the risk that someone might not repay you a form of exchange.  Interestingly, just last week I set up a loan where the terms included paying it back within a year, with 30 percent interest.  “Oh, no, the evil of it” I hear you all say.  But what if I told you all the banks had said no, creditors were at the door and it was the only way to save a business, 5 jobs and the owners’ retirement savings.  Isn’t the business owner getting something pretty tangible in exchange for someone taking on this risk, pretty much no questions asked?

Semantics aside, it is possible, even easy, to borrow under Sharia law.  The loans are structured so that the “lender” actually buys the asset and arranges for the borrower to buy it piecemeal.  So a Muslim schoolteacher might buy a house worth $500,000 on the market by making just 30 easy annual payments of $36,324.  Sound familiar – too right it does – it’s what we call in the West an operating lease.  In an operating lease, the asset is owned by the lessee until all the payments are made.  Those of you that are familiar with financial math will immediately grasp the fact that given the annual payments and the value of the house, you can easily derive an underlying interest rate – in this case, 6 percent.  Muslims know this – they and their near neighbours invented algebra.

Given all this, why focus on Sharia loans as “evidence” that Muslim people are not compatible with The West.  Unequivocally religiously motivated suicide bombing and religious murder is incompatible with Western doctrines, but if someone likes operating leases over traditional housing loans, what’s the big deal?  In fact, perhaps The West should explore expanding the application of operating leases, to farmers and graziers in particular.

Not only that, the Christian Bible also contains many admonitions regarding the charging of interest, Leviticus 25:35-37, Deuteronomy, Exodus 22:25, Luke 6:34-35, Psalm 15:5 Romans 13:8, Matthew 25:27, Ezekiel 22:12, and Proverbs are some.  To me, the most interesting of these is Psalm 15:5:

“Who does not put out his money at interest and does not take a bribe against the innocent? He who does these things shall never be moved”

Islam or Old Testament, it seems that the idea that charging interest on borrows is in some way generally undesirable.  This is something I have thought a lot about in my financial career, and the conclusion I have come to is that borrowing limits the ability of an individual to be themselves and to achieve fulfilment (personally or in God, however you wish to view it).  Think of all those people trapped in jobs they hate, simply to pay the mortgage, or of women in unhappy marriages, because (perhaps amongst other things) the mortgage prevents them from setting their own destiny.

Perhaps the last work belongs to William Shakespeare, who through the eyes of Lord Polonius observed:

“Neither a borrower not a lender be,

For loan oft loses both itself and friend,

And borrowing dulls the edge of husbandry

This above all: to thyne ownself be true.”

By David French

Interest rates are currently at historic lows which have seen capital city property prices experience substantial growth. The great Australian dream of home ownership is becoming increasingly tougher for current younger generations without assistance from Mum and Dad.

Actually saving for a home deposit in this low-interest rate environment is becoming harder and harder.

Increasingly it seems children are now seeking the assistance of Mum and Dad to be able to enter the property market. For many years the only way banks would provide funding for a property purchase without a deposit was if physical cash was “gifted” to the children from Mum and Dad in order to represent the required deposit for the property purchase.

This is no longer the case, with many lenders now offering alternatives called “Family Pledge” or “Family Guarantor Loans”, where instead of cash gifts being provided to represent a 20% deposit, family members are actually able to provide a limited guarantee of an existing property security to be added as security to the new property being purchased. The property is owned in the children’s names and the limited family property guarantee can be released once the loan has either been reduced down sufficiently or the market value of the property being purchased reaches the 80% “Loan to Value Ratio” or LVR. It allows people who do not have a deposit or sufficient savings to be able to purchase a property with the support of a family member. The guarantee being provided is limited to the 20% deposit that would normally be required for the property purchase.

One of the potential benefits of these types of loans is that because sufficient security of 20% of the property purchase is being provided to the banks, you are able to avoid the expensive “Lenders Mortgage Insurance” or LMI banks would normally require if less than a 20% deposit was being provided.

An important consideration when exploring these types of loans in particular is do the children have sufficient incomes to be able to meet and service the loan repayments over the life of the mortgage, especially in this low-interest rate environment, when interest rates will inevitably rise at some point over the potential 30 year life of the loan.

Another important consideration would be reviewing income protection and lump sum insurances for the borrowers to ensure that in the event of anything untoward happening to either borrower, the mortgage is fully protected and able to be repaid.

This is still a very complex area and it is important to fully understand the risks of helping out a family member and it is therefore important that you seek independent legal and financial advice. Contact us today if you would like to learn more about our mortgage broking services.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.

If you study any formal course in finance it won’t be long before you are faced with the concept of “time value of money”.  What it means is that there is a cost to the delay in receiving money, and so we say that “a dollar received today is worth more than a dollar received in the future”.

There are two reasons why it is better to receive a dollar today than a dollar in the future.  First, if you receive a dollar today, then you can invest it and get an additional return.  Second, there is always a risk that you will receive less than promised, or nothing at all.

For more numerate readers, that you might consider accepting 97 cents now, rather than $1.00 in a year time.  If with certainty, you could earn 3 cents in interest over the year, then (taxes aside) you would be just as well off taking the 97 cents now, as waiting a year for your $1.00.  If you could pay off a loan, say a credit card, with the money received now, you might be as well off taking 85 cents now, rather than wait a year and pay credit card interest.  Essentially, the more risk you might not receive the money in the future, and the greater the return you can gain from investing the money now, the less you would be prepared to accept now.

So in finance, time has a clear monetary value and as touched on above, the methods of working out that value are well-established.  But what about other ways of putting value on time?

Applying the time value of money concept, it’s quite clear that getting something signed off or delays in finishing a project can be costly.  That’s probably obvious when considering large constructions – delays in finishing a big hotel (for example) mean there is a lot of money sitting around earning nothing – but it applies just as much to day to day activities that we all undertake at work.

When the tax office stuffs you around, when the local council continues to vacillate over an approval, when legislative changes or indecision prevents you from making a choice, all of these things create risk and delay.  They stall the receipt of revenue, they create project risk and the burn time you could be spending on other things.  Sometimes these delays and problems are so bad that they involve employing additional people.  Overall, the delays themselves make it more expensive to do business.

Perhaps the monetary side of that is obvious, but there are personal and social costs too.  Not building an efficient road network or a high speed rail link between Sydney and Melbourne steals people’s time.  Small amounts each trip perhaps, but over one’s life, time that adds up – time that could be spent with the family, time spent fishing or at golf, time spent blowing the froth off a few with good friends.  Perhaps that sounds trite, but I put it to you that those people who create delay, who don’t do their jobs well, who don’t care, who give you the run-around, who are attending to their personal stuff while charging you, who go on strike during your holidays, these people are stealing your life.

In an era where for many of us work is demanding, and responsibilities of all types high, it’s time we started to take a stand on time-thieves.  It’s time business recovered some of the ability to select and fire employees, to insist that Government departments and officers are held accountable, simply to enforce the social contract implied through employment and regulation.  Failure to do this means business operators will have to change more and more for producing the same goods and services, and those that cannot will simply drop out.

That’s what you can look forward to if the current combination of individualism, workplace bias, and allergic reaction to productivity improvements is not addressed.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.

I’m looking to shed some light on insurance claims and hopefully shatter some illusions that insurance companies never pay claims.  We’ve all heard at least one horror story about an insurance company not paying a claim.  The most recent you may recall is the CommInsure scandal as reported by Four Corners in March 2016.  The story reported that claimants had suffered a trauma event, illness or injury and somehow did not meet the required definition to receive payment.

A recent independent study, across the main 13 insurance companies in 2015, shows they paid almost 90,000 claims totalling $6.9 billion.  These figures are up from 75,000 claims, totalling $4.9 billion in 2014.  This is a staggering increase in just one year, and it has been consistently rising in recent times.

Additionally, the insurance Big 5 stood up to their devastating reputation yet again in 2015 as leading causes for claims across all types of life insurance.  The Big 5 include: cancer, heart disease, mental health (e.g. stress, depression, anxiety), musculoskeletal (e.g. Osteoporosis, broken bones, torn ligaments) and neurological (e.g. Alzheimer’s disease, Multiple Sclerosis, dementia).

This year alone I have assisted with six new claims and one ongoing claim.  That’s one per month on average.  Six of these claims fell into the Big 5 category.  It’s so gratifying to know that these clients and their families are covered should the unexpected occur and their insurers have fulfilled their promises by paying the claims.

Something to contemplate when considering your own situation, how many of those 90,000 claimants do you think expected to claim?  How do you think their dependants would have fared if they didn’t receive the claim proceeds?  How will your dependants fare if you’re not insured?

To make sure you don’t become the next horror story, be sure to follow these three tips:

1. Don’t give insurance companies a reason to not pay a claim – be truthful on your application form and disclose all pre-existing conditions.
2. Consider taking out a level premium option – this means your premium will be the same price year-to-year, only increasing with CPI. By doing so, you will be able to hold the policy longer when your risk of claiming increases.
3. Speak to an adviser – in most cases where an insurance company has not paid a claim the claimant has not had an adviser. An adviser will be able to assist you in making the right choices when considering life insurance.

If you or anyone you know have any questions regarding their own situation and are considering taking out or making changes to life insurance, please contact us know.  It would be unfortunate to see you make the same mistakes others have made before you.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.