It has often been said that the difference between success and failure is having a plan in place.  As with many things in life, the earlier you get started on your plan, the more successful the future outcome will be.  This is particularly true with regards to building and protecting your wealth.  A vital aspect of long term financial planning regularly overlooked is the importance of obtaining adequate personal risk protection cover.

Adequate risk protection cover such as Death, Total & Permanent Disability, Trauma and Income Protection provides a foundation onto which you will build the structure for your accumulation of wealth into the future.

Now that the new financial year has ticked over again, it may be the time to ensure you have sufficient protection in place as a contingency plan for anything that may happen in the future.  A wealth protection strategy will reduce the risk of you and your family not achieving your financial goals.

Starting out in life, you may have very little in savings and debts to manage.  If a family comes along, you should also consider how you will provide for your family and clear your debts if the unexpected occurs, particularly if you rely on one income.

Taking out cover while you are young and healthy will pay off in the long run.  If you purchase cover earlier in life, you will have access to lower premiums and you are less likely to have your cover restricted due to health conditions which are more prevalent as we get older.

Relying on your default cover via your superannuation to provide comprehensive protection for your specific needs is an all too common trap which should be avoided.  You may have an automatic level of cover on joining your fund, and this will rarely provide the benefits required to pay off the average mortgage, and cover future expenses for your partner and/or kids if you die, or stop working because of an accident or illness.

A long term strategy to consider is obtaining cover under Level premiums, instead of the more popular and initially cheaper option of Stepped premiums.  Stepped premiums will increase annually based on the higher probability of you claiming as you get older.  Unfortunately, many people with stepped premium protection in their later years, have to reduce or consider cancelling their cover, due to premium increases at the time when they may need it most.

A Level premium will ‘future proof’ your wealth protection as the premium will increase annually based on CPI, rather than increasing age risk factors.  When you are older, you will be able to maintain your cover as the premium has been averaged over the life of the policy.  On face value, stepped premiums appear to be the cheaper option when you are young, but Level premiums provide the longer term security to hold your valuable cover into the future.

Remember, sometimes more is lost by inaction, rather than action.  Plan for the future today so you don’t regret your inaction tomorrow.

This advice is prepared as general advice only, not taking into account your personal objectives, financial situation or needs. Please consider the appropriateness of the advice in light of your objective, financial situation and needs before following the advice. If you would like to know more and/or to hear about whether the above advice would apply to you, please contact one of our insurance advisers today.

Can I give my kids some money?

I hear this question quite often from my clients.  There are several answers to the question.  Underlying it all is the normal parental need to be able to assist our family while they are juggling the usual expenses of home and children, from an income that doesn’t always stretch quite as far as they would like.

The first part of the question is – can I afford it, and your answer to that may be that you think you can.

The next part of the question is – are there consequences for me?

There may be – for instance if you receive a Centrelink age pension there is a limit as to how much you can gift to your children.  The current limit is $10,000 per year up to a maximum of $30,000 over a three year period.

If you are a fully self-funded retiree the consequence could be that your ability to maintain your own lifestyle in retirement is compromised, so it is a question that needs careful thought.  It is recommended that you seek advice from your advisor.

Is giving cash the best way to help?

It is debatable as to whether straight out cash gifts are really the best way to help – you can’t direct where the cash is spent, and it may not be put to its best use.  What if we paid an essential expense instead?  Examples might be to contribute to the grandchildren’s school fees or to pay the life insurance premium for your son or daughter?

Paying a life/TPD (total and permanent disablement) insurance premium for an adult child may mean the difference between them being properly insured, or having little or no life or TPD insurance.  This not only protects your child and his/her family, but it protects you too, as you may be called upon for support should your child become ill or disabled.

I would like to start an investment for my child/grandchild.

This is also an excellent way to give your family a helping hand as it is a long-term solution that will provide some passive income and capital growth in the future.

A small investment in the Capricorn Diversified Investment Fund, with distributions set to be reinvested, is one way you can achieve this, and it is even better if you add extra contributions from time to time.  By the time the newest grandchild is old enough to attend university or wants to buy a car for example, there will be a tidy little nest egg they can draw from.  You can view details of the Fund here or contact us for information and assistance.

Want to learn more about helping out your children/ grandchildren? For your free initial consultation with one of our friendly advisers, contact us today! One of our advisers would be delighted to assist you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

Did you know?

Heart disease in children is the leading cause of death, accounting for more than 30% of childhood deaths?  Or that 200 children under the age of 14 are diagnosed with leukemia each year, with treatment taking approximately 2 years?

What would happen if this was your child, or grandchild? Would you have adequate funds available to cover costs of hospital and treatment? Would you or your partner be able to stop work indefinitely to care for your sick child? Unfortunately for most people there would not be sufficient funds simply ‘lying around’ to eliminate the financial stress of coping with a sick child.

Thankfully, there is great news, a low cost solution that will ensure dollars are available to you when needed most – Child Trauma Protection.

Trauma Protection is designed to pay a lump sum amount in the event of a specified illness or event, for example, cancer, stroke or heart attack. It is now possible to not only ensure your health, but the health of your children.

In the event your child suffers a major illness or dies, you will receive a lump sum payment (as determined by you) to ease the financial burden and help allow for:

• Parents to stop work and take care of the child full-time
• Funding for medical treatment & hospital costs
• Funding to provide for ongoing care or other objectives (e.g. family holiday)
• How much does peace-of-mind cost?

Child Protection must be taken out in combination with trauma protection for an adult, the cost is approximately $150 per annum. Once the child is age 18, they are eligible to convert the policy to an adult policy without any health assessment.

Are you interested in gaining a better understand of protecting your children? Do you want make sure you have the right insurance to protect all of your family members? For your free initial consultation with one of our friendly advisers, contact us today! One of our advisers would be delighted to assist you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

There have been a lot of questions from clients lately about why they need all the different types of personal risk insurance; Life, Total & Permanent Disability (TPD), Trauma and Income Protection.  Each insurance covers something different and it is important to understand how all of these insurances work together.  Below I’ve detailed a brief summary about the different types of insurance and how they work together.

Life

Life insurance is pretty straightforward.  A lump sum amount will be paid out in the event of death or terminal illness.  The purpose of life cover is to pay down any debts, provide an income to your surviving spouse or children, contribute to future education expenses if you have children, and assist with funeral expenses.

Total & Permanent Disability

Total and Permanent Disablement (TPD) is payable in the event you become totally and permanently incapacitated due to sickness or injury, and it is unlikely that you will ever be able to return to work.  Again, this cover will provide a lump sum to reduce or extinguish debts, and provide an income to you and your family.  It may also help with home and car modifications following your disability and can assist with ongoing medical bills.

Trauma

Trauma cover also pays a lump sum should you be diagnosed with a serious medical condition, or if you suffer from an event covered under the contract. Trauma insurance covers a wide range of conditions such as Heart attack, Heart surgery, Cancer, Stroke and other neurological conditions, organ failure and various blood disorders.  Benefits can assist with the costs of specialist treatment and medication which are not covered via Medicare or private health cover.  Trauma protection can help with every day costs of living, and offer support financially should you or your partner need to take time off work to assist in recovery.

It is important to note that some people who suffer from a trauma event return to work before they can claim on their Income Protection policy.  Due to advances in medical technology, and less invasive treatment for many of the diseases covered via a Trauma policy, there is also a reduced likelihood of becoming totally disabled and a much higher survival rate.

Income Protection

Income Protection (IP) covers you for partial or total disability based on a waiting period and a benefit period.  If you suffer an injury or illness that leaves you unable to work for longer than your waiting period, you will be eligible to claim on your policy.  Income Protection typically provides a monthly payment whilst you are unable to work.  Your claim will continue until you are able to return to work, or you have reached the end of your benefit period.  It is important you know what your waiting and benefit periods are. The maximum entitlement for IP insurance is 75% of your taxable income, and you may also be able to cover ongoing superannuation contributions under some contracts.

As always, if you have queries or concerns about your insurance you should speak with your friendly adviser. We are here to help.

Are you interested in getting your current insurance reviewed or wanting to get the right cover for you and your family? Contact us today for your free initial consultation, 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.

Picture this. You’ve recently retired, and you’re reasonably confident you’ll have enough savings to fund the comfortable lifestyle you’d always hoped for.

Then you receive a phone call with some bad news – your daughter has been diagnosed with a serious health condition, cancer. More than half of all death in Australia is due to cancer.

With the bills piling up, and your daughter set to be out of the workforce for an indefinite period, you invite her to move back into the family home. You ask whether she has life insurance to help finance her ongoing living needs, only to find out she’d never gotten around to it.

It’s a natural instinct for a parent to do whatever it takes to help their children when they need you. And luckily for the baby boomer generation, and your children, many of you have the financial resources to help out.

But what if ‘helping out’ meant you had to stay in the workforce longer, or cut back on your retirement lifestyle to help fund your child’s mortgage, medical expenses or living costs?

Or what if you had to provide for your grandchildren? What would that mean for your own financial situation – both now and in the future?

These scenarios may sound extreme, but consider the following statistics:

• One in five families will be impacted by the death of a parent, a serious accident or illness that renders a parent unable to work.
• Two-thirds of families with kids at home couldn’t meet their expenses beyond 12 months of the main breadwinner having passed away.
• 95% of families do not have adequate levels of insurance.

Do your children have it covered?

Generations X and Y are comfortable with the idea of using debt to achieve their goals. And to get into the housing market, they often have to take on considerable mortgages, which can take a decent bite out of their income.

Of course, all of this is sustainable when they’re working full-time. But if your children don’t have adequate protection for their income, their debts, and their dependents, they could be vulnerable to serious illness or injury. Their own families (if they have one) can also be considerably exposed if they die. Raising children is expensive. It estimated to cost $537,000 to raise two children from birth to age 21. This does not allow for private education.

When you consider the maximum disability support pension available from Centrelink is only $877 per fortnight ($22,802 p.a.), an extended period out of the workforce could leave a big hole in their budget. That’s if they’re eligible for any government assistance at all. Qualification is based on the extent of their physical condition and is means-tested.

Talking to your children about life insurance

Many adult children will discuss their major financial decisions with their parents. Major events like getting married, buying a house, or even changing jobs are good opportunities to talk to your children about life insurance.

One of the good things about taking out life insurance from a younger age is that premiums are often very affordable.

For example, a 30-year-old female clerical worker can take out $500,000 life insurance (with Total and Permanent Disability cover), plus $4,000 a month income protection, for around $3 a day (Source: TAL Life Limited ABN 70 050 109 450 AFSL 237848).

This cover will provide some financial relief in the event of serious sickness or injury. It will also make available a lump sum on death that may be used to pay off debts, medical bills or help the family meet ongoing living costs.

The best way to help your children get the right level of protection for themselves (and you!) is to encourage them to discuss their life insurance circumstances with a financial adviser or specialist risk adviser.

Are you interested in getting your life insurance reviewed or do you need to talk to someone about what life insurance is right for you? Contact us today for your free initial consultation, 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 its appropriateness to you, having regard to your objectives, financial situation and needs.

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.

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.

Due to a curiosity for all things medical (and ongoing professional development requirements!), I recently attended a seminar in relation to underwriting and claims. Part of the presentation focused on diabetes which is becoming more prevalent in Australia, and is of increasing concern for life insurers from both an underwriting and claims perspective.

The facts:

With approximately 1.2 million people currently diagnosed with either Type 1 or Type 2 Diabetes, and an estimated 500,000 others who are undiagnosed with Type 2 diabetes, this chronic condition is becoming one of Australia’s greatest health issues.

Type 1 diabetes (known as insulin dependent diabetes mellitus or juvenile diabetes) is an autoimmune condition which is typically diagnosed under the age of 30, but can occur at any age.  Type 1 diabetes is often linked to family history and requires lifelong insulin replacement, usually via injections.  Insulin is a hormone produced by the pancreas which converts the glucose from food, and turns it into energy.  Type 1 diabetics create little or no insulin of their own, due to damage to the cells in the pancreas that produce insulin.

Type 2 diabetes (non-insulin dependent diabetes mellitus or adult-onset diabetes) is usually caused by genetic or lifestyle factors, and is a progressive condition whereby the sufferer develops resistance to the effects of insulin, and/or gradually loses the ability to produce enough insulin in the pancreas.  Type 2 diabetes represents up to 90% of all cases, and usually diagnosed over the age of 45, but is increasingly being diagnosed in children, teenagers and younger adults.

In Australia, 280 people per day will develop diabetes which is around 1 in every 5 minutes!

The impacts:

• The estimated annual cost of diabetes in Australia is $14.6 billion.
• 40% of Type 1 sufferers will develop serious kidney problems leading to kidney failure prior to age 50.
• Diabetic Retinopathy damages the blood vessels in the eyes and is the leading cause of blindness in adults.
• Diabetic Nephropathy damages the filtering units in the kidneys and is the leading cause of renal failure.
• Diabetics have a 2 to 4-fold increase in the risk of stroke or death caused by cardiovascular events.
• 8/10 diabetics will die from cardiovascular failure.
• Diabetes can lead to damage to the peripheral nervous system in the feet and hands known as diabetic neuropathy.
• High blood sugar can damage and weaken blood vessels in the limbs causing them to narrow and reduce the circulation of blood around the body, resulting in the death and decay of tissue. The only treatment is available is amputation of the affected body part.

Diabetes and insurance

Due to the long-term complications of diabetes, obtaining personal insurance cover when the illness is an existing condition, or there is a strong family history, can be difficult.  An underwriter may decline the application, excluding the illness, or increase the premiums for the cover.

The increasing presence of diabetes in Australia highlights the need for adequate personal cover.  Many of the insurers offer benefits under their Trauma policies for the diagnosis and complications arising from Type 1 and Type 2 diabetes.

If you would like to learn more about our life insurance services, please contact us today. One of our friendly advisers would love to speak with you.

Having just welcomed our second child into the world and with the new financial year upon us, it has certainly been a time of reflection about new beginnings and what lies ahead for the future. The seemingly endless routine of getting up during the night and changing nappies, dream feeds and rocking your precious little ones back to sleep gives you an abundance of time (where most normal people are actually sleeping) to think and reflect on where you are and what you want to achieve.

Being a first-time parent was daunting enough and came with all sorts of challenges my wife and I were still adapting our lives around before finding out we were expecting our second child. Having our second child so close together came as a totally unexpected, yet welcome surprise. But what had we gotten ourselves into having two daughters under the magical age of two?

Like all parents, I imagine that we want the very best for our children that we can possibly provide. However, having someone completely and utterly dependent upon you to tend to their every need, was one of the most daunting aspects of Fatherhood for me personally, yet it was also something that I embraced. Being the sole income earner supporting our little family only highlighted the importance of ensuring we had adequate insurance coverage in place to ensure our family would not be financially burdened in the event of anything happening to either parent.

The birth of both children will forever be etched into my memory as some of the greatest experiences of my life. Hearing their first cries as they entered the world will be sounds that I will never forget. Holding them both for the first time and seeing how tiny and fragile they were is also something that will stay with me forever.

The age difference between our girls is 17 months. I was an only child growing up and my wife has a twin sister, so she always knew the benefit of having a sibling growing up and it was something she wanted for our first child. With the closeness in age of our girls, here’s hoping they will be lifelong friends, with a few heated disagreements thrown in along the way.

With all the sleepless nights and challenges that come from being a new father, the rewards certainly far outweigh any of the negatives. Seeing them learn new skills each and every day and interact with each other brings a smile to my face whenever I think about them. It is funny as human beings, we tend to forget or block out the bad memories of all the sleep deprivation and only remember all the good memories.

Having become a father has made me appreciate all the sacrifices my own parents have made for me in order to allow me the best opportunities possible. I look forward to making many sacrifices for my own children to ensure that the cycle can continue.