IS INSURANCE WORTH IT?
Colonial First State explore the issue in this informative article. Please follow the link to the original article.
As the year winds to a close and you start to plan celebrations with friends and family, it’s a good time to think about the future. Insurance doesn’t necessarily go hand-in-hand with roast turkey and Kris Kringle – but insurance and Christmas both focus on the same thing, a time to reflect on what’s most important to you.
Insurance can be difficult to understand, so we’ve explained some of the common insurance terms you may come across on your super statement to make insurance a little easier to understand.
DO YOU HAVE THE RIGHT TYPE OF COVER?
There are three types of personal insurance available:
- Death only cover (also referred to as life cover). Death cover held in super can provide a lump sum payment to your beneficiaries or your estate if you pass away. If preferred, an ongoing income stream rather than a lump sum can be paid to certain beneficiaries like your spouse and minor children. Death cover is intended to help with funeral costs, outstanding debts and your family’s ongoing living expenses.
- Death and total and permanent disablement (TPD) cover. This combined cover offers the same entitlements as death only cover for your beneficiaries, as well as providing a lump sum paid to you if you can no longer work due to illness or injury. TPD cover is a lump sum payment to help with your medical and living expenses.
- Salary continuance insurance cover (also referred to as income protection). This cover pays a income stream should you be temporarily disabled and unable to work.
IS YOUR COVER ENOUGH?
Through your Colonial First State super account, you can apply for up to $5 million for Death Cover and up to
$3 million for total and permanent disablement cover (as long as it doesn’t exceed your Death Cover amount), and up to 85% of your before-tax monthly income for Salary Continuance Insurance Cover.
A good way to work out how much you may need is to add up your long-term financial obligations, such as mortgage repayments, the cost of your children’s education costs and other debts. If you find that the amount you’re insured for isn’t enough, you may want to consider increasing your cover amount. Just remember that the higher your cover amount, the higher the premium you will have to pay each month. The Life insurance Need’s calculator (https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/life-insurance-calculator) on ASIC’s MoneySmart website is a quick and easy way to estimate your required cover.
Colonial First State offers a ‘life events’ option, which means you can apply to increase your cover if you go through a major life event (such as getting married or divorced, having a child, or sending your kids off to school for the first time) without having to send the insurer any medical information – but you will need to show them documents relating to the life event.
HAVE YOU NOMINATED YOUR BENEFICIARIES?
The beneficiaries listed on your statement are the people who you’ve chosen to receive your super and insurance benefits if you pass away. If you haven’t nominated any beneficiaries, your super might not be distributed according to your wishes when you die. In this case, you may want to complete a non-lapsing death benefit nomination form (https:// www3.colonialflr ststate.com.au/content/ dam/ prospects/ fs/ 4/7 / fs4700.pdf) for your Colonial First State super account. That way, you’ll know your super and insurance benefits will go to the right people.
HOW MUCH ARE YOU PAVING IN PREMIUMS?
When you have insurance cover through your super, your premiums are automatically deducted from your super balance rather than your bank account. While this is a great way to manage your cashflow, it also means you might not know how much you’re paying. You’ll see your premium amounts listed on your statement.
IS YOUR SMOKER STATUS CORRECT?
If you’re a smoker, you’ll generally pay higher premiums for your insurance cover because there’s a higher risk of developing certain illnesses. You can see your smoker status on your statement. If you’re listed as a smoker even though you don’t smoke – then call us to get this updated so we can tell your insurer to adjust your insurance details.
DOES YOUR OCCUPATION RATING MATCH YOUR CURRENT JOB?
Similar to your smoker status, the occupation group you belong to (eg blue collar, white collar, professional) may affect the cost of your insurance . Your premiums won’t change automatically if you change jobs, but you
can contact your insurer to change your insurance details if you think your job puts you in a different category to your old job – and this may result in lower premiums.
YOUR ADVISER CAN HELP
Your financial adviser can help you work out the most affordable and effective insurance options – and help you update your insurance cover if you think it’s out of date. So give them a call today.
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author.
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