CCA Financial Planners

Life insurance held within your SMSF | The pros and cons

Christopher Cachia — Fri, 03 Feb 2012 09:00:49 +0000

Self-managed super funds (SMSFs) give people more control over their superannuation, and they can also hold personal insurance policies such as life insurance, total and permanent disability (TPD) insurance, and income protection insurance. There may be several advantages of purchasing life insurance through your SMSF, but there are also some drawbacks you may not have considered. Here are some of the pros and cons of having SMSF life insurance compared with having an insurance policy outside of super.

Pros

Life and TPD insurance are typically tax deductible if owned by a SMSF, but not if owned by an individual. Income protection insurance is generally tax deductible on policies outside of super.

Note: The rules on TPD tax deductibility have changed as of July 1, 2011. You can only receive a full tax deduction on your premium if your illness or injury is enough to deny you the opportunity to work in any occupation for which you are reasonably qualified for. Only a partial tax deduction can be permitted if ill health prevents you from being employed solely in your own occupation.

Holding your life insurance with your SMSF boosts your cash flow flexibility, as you will be able to pay your insurance premiums directly from your SMSF account rather than taking it out of your regular income.

Cons

It is generally difficult to successfully claim for trauma insurance benefits. To claim trauma (or critical illness) benefits, you need to satisfy strict conditions of release, which means it could take some time to process the claim.

If the payout of a life insurance claim goes to a non-dependent tax will need to be paid. This is usually deducted from the Life insurance payout and or benefit.

Speak to one of our advisors for further information on the benefits of obtaining life insurance through your SMSF and to ensure your coverage is sufficient for your needs.

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Make personal insurance easier with an advisor

Christopher Cachia — Sat, 14 Jan 2012 08:30:48 +0000

Making a personal insurance claim usually means that something unfortunate – often traumatic – has happened. Going through the claims process after suffering a severe injury or being struck by a debilitating illness can be a distressing time, which is why it’s vital to have a reliable insurance advisor to help you through the often daunting process of filing a claim. CCA Fp advisors are continually kept up-to-date with new developments in the insurance industry and have an intimate knowledge of the insurance products they deal with and this can help ensure that the claims process goes as smoothly as possible for clients.

A reliable and effective advisor is one who has an in-depth understanding of all the formalities involved in making a claim. He or she will know what questions to ask and what to do if complications or issues arise. A competent advisor can help clients to understand the insurance products they are purchasing, and the claims process.

Life Insurance Claims

CCA Fp’s life and income protection claims service is lauded for its efficiency and effectiveness in managing claims, whether for life insurance, total or permanent disability, critical illness or income protection policies. Our advisors are committed to being there for clients from the initial lodgment of the claim to the pay-out.

Our advisors understand how traumatic the claims process can be. Often our clients will be dealing with intense medical treatment, loss of income and physical and emotional pain. Getting a claim processed as efficiently as possible is one area where our advisors may be able to help their clients through a difficult time.

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Personal insurance explained

Christopher Cachia — Mon, 09 Jan 2012 09:42:56 +0000

There are a number of personal insurance options that are available to financially protect you and your family should the unthinkable occur. Several of these come under the umbrella of life insurance, which provides financial compensation in the event of death or the diagnosis of a terminal medical condition.

Term Life Insurance

Life insurance is designed to pay a lump sum to your nominated beneficiary if you die. You will set the amount that you want to be covered for. When nominating an amount, it is important to consider any debts you may have, education expenses for your children and your family’s general living expenses. You want to know that your family will not be under financial pressure if something happens to you. Your age, lifestyle and health will affect the cost of your premiums.

Funeral Insurance

This may be an alternative to term life insurance for some individuals who may have difficulty obtaining affordable life cover. Funeral insurance is designed to pay a lump sum to your family to help cover funeral costs if you die. One of the advantages of this type of insurance is that you usually do not need to give medical information but the main drawback is that by comparison with life insurance, the premiums can be high for the level of benefit involved.

Income Protection

How would you provide for your family if you were forced to cease employment through sickness or injury? Income protection provides a solution. With a suitable policy in place you can receive a regular payment as a replacement for your lost wages. Income protection will generally only provide up to 75 per cent of gross wages.

Total and Permanent Disability Cover

TPD offers financial protection in the event that you suffer injury or illness so serious that either you can never go back to work, or (depending on the policy you choose) you can never work again in your current occupation. TPD can help pay for rehabilitation costs, and future living expenses.

Trauma Insurance

Also called critical illness cover, this type of insurance is designed to pay a lump sum if you suffer a serious illness. Trauma insurance can help pay for medical expenses, living expenses and debt repayments.

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Purchasing life insurance – in or out of your SMSF?

Christopher Cachia — Fri, 06 Jan 2012 09:38:19 +0000

Purchasing your insurance through a self-managed super fund (SMSF) may have a number of advantages over having it in your personal name. These include tax deductions on life insurance and total and permanent disability (TPD) insurance as well as improved cash flow due to the fact that your insurance premiums are being paid by your super contributions.

Not all types of insurance are suited to SMSFs. Trauma insurance, also known as critical illness cover, is available through a SMSF, but there are some major limitations.

Trauma insurance covers situations in which you could become permanently incapacitated such as a serious accident or traumatic event like a heart attack. In order to access the claim through your SMSF policy, you will need to satisfy several conditions of release, which could include:

- Reaching age 65

- Being permanently incapacitated (as deemed by the SMSF trustee)

- Temporary incapacity

- Terminal illness

- Death

- Severe financial hardship

- Compassionate grounds

People who experience a trauma event or critical illness will not necessarily satisfy these conditions of release. This means that you could be unable to access the money that was locked away in your super for a number of years. It is important to think carefully about whether you want trauma insurance inside or outside super. With trauma insurance under your personal name, it’s more likely you will be able to access the funds quickly when a relevant situation arises.

Speak to one of our advisors about getting personal insurance through a SMSF and to make sure you have adequate life insurance and income protection cover to meet your needs.

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Life Insurance for seniors | Funeral Insurance Vs Life Insurance?

Christopher Cachia — Sun, 18 Dec 2011 08:25:26 +0000

It’s common for seniors to be uncertain as to whether they need life insurance. Many seniors have achieved some major financial goals – they’ve paid off the house and sent their children through school. They only require day-to-day living expenses. But they may not realise the financial hardship they could put their spouse or other relatives through if they die.

There are two main life insurance options for seniors – funeral insurance and term life insurance. Deciding which one to choose depends on a number of factors.

Funeral Insurance

Funeral insurance provides a lump sum payment to your beneficiaries if you die. The main benefit of this is that your family can pay for your funeral expenses and not have to worry about any resulting financial stress during an already distressing time.

In some cases, funeral insurance premiums may be more expensive than term life insurance premiums, so you need to carefully assess your situation. Often there is no medical exam required with funeral insurance, so it may sometimes be a suitable option for those with health problems.

Seniors who are fit and healthy might decide to think twice about funeral insurance. If you take out a funeral insurance plan at 65 and live until 90, the amount you will have spent on premiums will be significant. Prepaid funerals or funeral bonds might be a more affordable option.

Term life insurance

Term life is generally cheaper than funeral insurance, although there is usually the requirement for a medical examination before your policy will be approved. The rate of premiums will depend on factors such as your age, health, lifestyle, and whether or not you’re a smoker.

For some it may be worth getting term life insurance and investing the money saved elsewhere. Our advisors can discuss your individual circumstances with you and help you make the decision between funeral insurance and term life insurance.

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Income Protection Insurance for trail bike riders

Christopher Cachia — Sat, 17 Dec 2011 08:57:20 +0000

It has traditionally been difficult to get affordable income protection insurance if you engage in activities that are considered high risk, for example trail bike riding – but AIA Australia has provided trail bike riders with income insurance at standard rates since 2004. Several insurance providers offer income protection for trail bike riders, but it’s common for there to be a loading fee.

The reason why income protection for trail bike riders can be hard to find or incurs additional fees is that it’s an inherently hazardous activity. An office worker with a perceived low risk becomes a high-risk client if he or she is a trail bike rider. The same is true for a number of high risk hobbies including surfing, mountain climbing and bungee jumping.

Insurers like AIA Australia do not believe people should be punished for having a pastime that is generally a healthy pursuit, which is why they don’t charge extra to protect trail bike riders.

Thanks to insurers like AIA, hobby trail bike riders covered by a suitable income protection policy can have peace of mind that if they do have an accident while riding and are forced to take time off work and receive medical treatment, they have financial protection in place. Competition riding however is usually excluded from income protection plans.

To lessen the severity of an accident and reduce the chance of needing to make an income protection insurance claim, trail bike riders should practice recommended safety measures, such as wearing the correct safety gear including a helmet, gloves, padded suit, boots and body armor, as well as sticking to state approved tracks.

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Zurich leads the way on income protection insurance

Christopher Cachia — Fri, 16 Dec 2011 03:12:56 +0000

Zurich Financial Services Australia has long been regarded as an income protection insurance provider of the highest order, as evidenced by its string of national awards. In 2011, Zurich received the Review Smartinvestor Blue Ribbon Award and the Canstar Cannex Outstanding Value award for its Term Life and Total and Permanent Disability (TPD) product.

Zurich has become the income replacement insurance provider of choice for many during this time of global economic turmoil and uncertainty. For anyone wanting peace of mind in the event that they cannot work due to ill health, parental leave or any other type of forced unemployment, Zurich offers income replacement that takes into account their clients’ income history for the past 24 months, where many providers only look at the past 12 months of income.

Zurich recently simplified its income replacement policies even further, making it easier for people in any income bracket to receive suitable protection and benefits for their situation. In February 2011 Zurich announced a three-tiered approach to income replacement insurance. There are now three levels of income protection insurance – premier, comprehensive and standard. Regardless of your budget and whether you’re a high income earner or a blue collar worker, Zurich may have a suitable income protection plan.

Comprehensive cover provides a “confined to bed” benefit and special care benefit on top of standard cover, while a premier coverage includes all standard and comprehensive benefits with the addition of family support and trauma benefits. These are all built-in benefits at no extra premium. In addition there are a number of optional benefits on offer for those who are looking to tailor their income protection insurance to their individual circumstances.

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Choosing a suitable waiting period on your income protection plan

Christopher Cachia — Thu, 15 Dec 2011 03:16:08 +0000

All income protection insurance policies have waiting periods. The waiting period is the time between being declared unable to work and receiving your first insurance payment. When you sign up for an income protection plan you decide how long you wish the waiting period to be (it usually ranges from two weeks to two years). Choosing an appropriate waiting period depends on a number of factors, including:

Budget: The longer the waiting period, the less you pay on your premium. You need to assess how long you can afford to go without income. What does your savings account look like and can you afford to dip into it? Do you have a mortgage? Do you have credit card repayments? These factors will all need to be taken into consideration when deciding on a suitable waiting period.

Accumulated leave: Have you accumulated a lot of sick leave and annual leave at your workplace? If so, you might be able to afford to choose a longer waiting period. If you don’t have much leave accrued, consider how long you would be able to survive without a steady income.

Risk: No one can predict the future but factors such as the current state of your health and the inherent risks in your profession can help you make an estimate as to the probability that you will be prevented from working in the future. Shorter waiting periods attract higher premiums because insurers consider there will be a greater chance of you making a claim.

Fine print: This is where an advisor can be extremely helpful. An advisor can help you sort through the minute details of different companies’ product disclosure statements to help you choose an income protection insurance policy that’s suitable for your circumstances.

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TPD in super – New rules surrounding tax deductibility

Christopher Cachia — Wed, 14 Dec 2011 03:11:29 +0000

July 1, 2011 saw a change in the rules surrounding tax deductions for total and permanent disablement (TPD) insurance policies owned by a super fund. The changes ushered in by the Australian Taxation Office mean TPD premiums that come under the definition of “own occupation” are only partially tax deductible. Premiums that relate to the TDP definition “any occupation” are still eligible for a full tax deduction.

The main differences between any occupation and own occupation are:

Any occupation: A circumstance whereby you suffer an injury or illness that prevents you from ever working in an occupation for which you are reasonably qualified. Situations in which “any occupation” benefits would be paid might include loss of eyesight, loss of limbs, reduced cognitive function and physical incapacitation.

Own occupation: A situation where your injury or illness prevents you from carrying out the duties of your specified occupation. You may be able to work in another occupation, or a similar one in a reduced capacity. Because there is broader scope to claim this benefit, the ATO has ruled that these premiums are not fully deductible. These policies will be tax deductible at 67 per cent of the TPD premium or 80 per cent if bundled with life cover.

The ATO ruling was handed down to address the fact that funds were claiming 100 per cent deductions on insurance premiums that did not strictly adhere to the definition of a “superannuation disability benefit”, otherwise known as “any occupation”. To find out more about how these regulations affect you, speak to one of our advisors.

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Exciting new improvements to MLC Masterkey Business Super

Christopher Cachia — Wed, 30 Nov 2011 08:08:17 +0000

MLC Masterkey Business Super has introduced some exciting new features to its insurance product.

Integral to its new and improved product is the Best Doctors medical information service. This service was established in 1989 to help people with significant illnesses connect to a worldwide network of leading specialists, so that they can get access to the most appropriate and effective medical advice for their condition.

MLC Masterkey Business Super members who have income protection insurance to age 65 and their immediate families can now have access to the Best Doctors service. This is an Australian first for superannuation and exclusive to MLC members. MLC pays in full for its members’ access to this potentially lifesaving service.

MLC has also streamlined its services so customers have better access to insurance products and can get increased benefits for less cost. Some of these improvements include:

- Increase in Automatic Acceptance Limits. Clients can apply for higher insurance limits without having to give medical information.

- Access to Total or Permanent Disability coverage for casual workers.

- Continuation of access to income protection insurance after cessation of employment.

- An easier way to consolidate super and insurance with an online form.

Another innovative feature is a new-look advice website called MLC AdviserOnline. This site is more user-friendly so you can easily find relevant information and make transactions. Clients can more readily access their account information, update their details, and view their statements online.

MLC also has a shorter, easier-to-digest product disclosure statement that is designed to be easier for customers and advisors to understand.

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