Personal insurance concepts

New To Getting Personal Insurance?

These 3 articles explain the different Personal insurance concepts:

  1. types of Insurance and potential uses
  2. how much cover do you need?
  3. ways to make life and TPD insurance more affordable

Did you know?

In a recent survey, 46% of Australians admit that they live ‘pay cheque to pay cheque’ including:

  • 1 in 4 households earning over $150,000 pa, and
  • 1 in 5 households earning over $200,000 pa.1

Seek advice. A financial adviser can help ensure you have the right insurances in place to help protect your family’s lifestyle. The first step is having the conversation. Contact Dev Sarker at 1300 717 136 today!

 

1 Research conducted by IPSOS on behalf of MLC in August 2015 and published in February 2016 in ‘Australia today – Part 1: A look at lifestyle, financial security and retirement in Australia’.


Changes to income protection insurance

What is income protection?

Also known as ‘salary continuance insurance’ or ‘disability income insurance’, income protection provides a portion of your income, for example 75% of your annual salary, if you are unable to work due to injury or sickness for a certain period of time. You need to advise your annual salary when you take out the cover.

Income protection policies always have a waiting period and a payment period. The waiting period is the time you must wait from when you make a valid claim, to the time you become eligible to start receiving payments. The payment period is the period you can be paid so long as you remain unable to work. Other terms and conditions apply depending on the policy. All of these factors affect the level of premiums you pay.

What are the changes?

Recently, the Australian Prudential Regulation Authority (APRA) announced that it is concerned that insurance companies have been keeping premiums at unsustainably low levels to compete for customers. APRA also think that some policies have very generous features and terms that, in some cases, provide a financial disincentive for people to return to work after successfully making a claim.

Has APRA announced what changes will be made?

Yes, effective from 31 March 2020, insurance companies must:

  • stop providing ‘agreed value’ policies that are based on the income you advise at the start of cover, regardless of any subsequent change in income. This means no more ‘agreed value’ contracts can be bought or sold after 31 March 2020.

What other changes are likely to be made?

Other changes, effective from 1 July 2021, include:

  • your insured income is to be based on your annual income at the time you make a claim, and are not able to look back more than 12 months
  • limits of 100% of income replacement payments can be made in the first six months and 75% thereafter, with a total limit of $30,000 per month
  • a maximum payment period of five years, with a right to renew cover
  • insurance providers must have adequate risk management processes in place to mitigate the risks associated with long term benefit payment periods.

APRA is seeking feedback on the above changes from the industry by 29 February 2020 and will make a final decision by 30 June 2020.

What happens to existing policies?

If you have an existing retail income protection policy which include a ‘Guarantee of Renewability’ in the policy wording, that is, the policy is automatically renewed each year, your policy will continue.

Are policies which meet APRA’s new expectations available now?

No, to purchase an income protection policy which takes into account APRA’s changes we need to wait until the insurance providers have issued new policies with new Product Disclosure Statements.

More information

For more information, please read APRA’s media release or contact our financial adviser, Dev Sarker today at 1300 71 71 36.


Protecting Your Small Business

Owning and operating a small business is hard work.
The last thing you need is to lose it all because of poor insurance choices.

Do your homework

First you need to work out what needs to be covered. There are the obvious things such as plant
and equipment, the less obvious things such as public liability, professional indemnity, and finally protecting the financial performance and position of the business on the sudden loss of a key person.

Policies should cover a wide range of eventualities and each business should have a policy package specifically geared to its needs.

People are the most important assets, and the success of the business may hinge on key personnel.

Business expense insurance can cover certain fixed business expenses, and key-person insurance can protect the financial performance in the event of a key person or business owner dies, is permanently disabled or suffers a traumatic event.

Insufficient coverage

Owners risk losing control of their companies, serious financial losses, and complex partnership problems by being uninsured, or under insuring against something going wrong.

Having the wrong kind of insurance is equally risky and ultimately a waste of money, which is why
it’s necessary to seek advice on the right insurance for your business.

It’s also important to regularly review and update your insurance, especially when your business grows or changes.

There is always tax

Your accountant should assess all taxation matters including the tax deductibility of premiums together with any potential CGT or GST issues.

Working together with your financial adviser to determine what insurances can be put in place
is an important consideration when running a business.

The Insurance Council of Australia, http://www.understandinsurance.com.au, and the Australian Taxation Office, http://www.ato.gov.au, have more information.

Want to know more?

Talk to a BlueRocke financial adviser, call us on 1300 71 71 36.


Cash flow can make or break your business, so take time to safeguard it

According to a recent survey by research firm East & Partners for lender Scottish Pacific, nearly 80 per cent of owners of small and medium enterprises said cash flow issues caused them the most sleepless nights.[1]

So what might you do to improve your cash flow and sleep better at night? Here are five tips.

1. Build a cash reserve

Cash flow is the lifeblood of any business. To ensure that it makes, not breaks, your business, it’s important to build a robust cash reserve. This may help you meet your financial obligations in difficult times and allow you to take on opportunities to grow your business.

2. Separate business and personal money

By keeping business and personal expenses separate, you may better understand your business’s cash position. It may also ensure that you don’t use money meant for your business on personal expenses; for example, a holiday or your mortgage.

3. Get paid on time

If your business hasn’t been actively pursuing unpaid invoices, you may want to make it a practice – and have a strategy – to regularly chase up payment. Finding ways to encourage prompt payment, such as offering a discount to early payers, may help.

4. Control business costs

Controlling costs might help you to maintain a healthy cash flow. Experts suggest taking stock of your business expenses regularly to identify where you can cut costs without sacrificing growth. This may include reviewing your suppliers and negotiating better rates with them.

5. Protect your business

By taking out business expenses insurance and key person insurance, you may help ensure your business can meet its running costs if you or a key employee is too ill to work. Both insurance plans provide a monthly benefit if you or a key person in your business become incapacitated.

Work with a professional

Your professional financial adviser could tailor your insurance plans to your business’s cash flow protection needs, safeguarding what you’ve worked so hard to build.

Contact Dev Sarker on 1300 71 71 36 today!

 

[1] Scottish Pacific and East & Partners, October 2018, ‘SMEs flag higher revenue growth, but prospects could be dampened by declining property market and cash flow issues,’ accessible at: https://www.scottishpacific.com/media-releases/smes-flag-higher-revenue-growth-but-prospects-could-be-dampened-by-declining-property-market-and-cash-flow-issues


Here’s why you need income protection

Your ability to earn an income is usually one of your biggest assets, so why not protect it?

A sudden illness or injury can keep you from working and leave you in financial difficulty. You may get help from a worker’s compensation payout or personal savings, but are they enough to help you meet your expenses and financial obligations?

Taking out an income protection (IP) plan may help provide peace of mind that you’ll be able to meet your financial responsibilities and focus on recovering. IP cover may provide a monthly income while you’re unable to work as a result of illness or injury. It generally replaces up to 75 per cent of your income for a set period of time.

Standalone or through super?

Getting your IP cover through your superannuation fund may be a good idea if you want to avoid paying for your insurance out of pocket. But keep in mind that the policies offered through super may not cover all your financial obligations for an extended period of time.

A standalone IP policy may provide more adequate coverage. It may also offer you tax benefits – IP premiums are usually tax deductible when you fund your cover outside super.

Making your policy affordable

If cost is a concern in taking out a standalone plan, there are a few ways you may be able to make your premiums more affordable. One of them could be choosing a longer waiting period before you receive benefits after being unable to work due to illness or injury. Generally, the longer you wait, the lower the premiums you have to pay.

Opting for indemnity cover may also help you keep your insurance costs down. You’ll have to choose between indemnity and agreed-value cover for your IP plan. Under an indemnity policy, your insurer bases the monthly benefit you would be paid on your income at the time you make a claim. For an agreed-value policy, the benefit is based on your income when you apply for coverage. Premiums for indemnity cover are usually lower than for an agreed value policy.

But indemnity policies may vary among providers, so speak to your adviser about which cover may suit you. Your adviser may also help you tailor your plan to meet your income protection needs.

Get in touch with Dev Sarker today on 1300 71 71 36. We look forward to partnering with you to help protect what matters most in this incredible life, and help take the financial pressure off you and your loved ones.


Stay financially healthy even in sickness

Don’t let an illness stop you from looking after your finances.

A Financial Adviser could work with you to develop a financial plan that’s specifically tailored to your needs, so get in touch with Dev Sarker today on 1300 71 71 36.