Most families are carrying significant financial risk should the unexpected happen. The big question you have to ask yourself is:
‘Would your family be able to maintain their lifestyle if you died?’
If your answer to this question is no, you need to consider transferring that financial risk to an insurance company.
Your financial adviser can help you do that, as well as answer any questions you have about life insurance, and then calculate how much life insurance you need to safeguard you and your family in the event something should happen to you or your spouse.
And, if you wish, your adviser will use our sophisticated computer program to find you the right cover, at a competitive price, from all the major insurance companies.*
Where should your life insurance be held?
You can hold life insurance in your name, or in your superannuation fund. Both options have pros and cons.
For example, holding life insurance in your name means that the payout may usually be directed to your beneficiaries quickly and with certainty, and free of tax. However, you cannot obtain a tax deduction on the annual premiums you pay.
Conversely, if your life insurance is held in your superannuation fund, you may receive a tax reduction on the annual premiums. In addition, because your superannuation fund pays those premiums, it means you have cover without eating into your family budget. So this option is usually the more affordable for most people.
However, if you died, the trustee of your superannuation fund may delay the payment to your beneficiaries, and may even dispute who should receive the payment (especially if you have not made a valid ‘binding death benefit nomination’). Further, the payment may be taxable at up to 32% if the beneficiary is a non-tax dependant.
How do the insurance companies view you as a risk?
Some insurance companies may charge you significantly less than other companies for the same cover, simply because they see you – or your occupation – as a lower risk. That’s why you should use a financial adviser who has the ability to compare the policies from the reputable insurers to get the best solution for your particular situation.
What is Life Insurance?
Life insurance pays a lump sum on the death of the insured, and in some cases earlier if the life insured is diagnosed with a terminal illness. The payout can be used for any purpose – typically it is used by beneficiaries to pay off debt, pay for funeral costs and look after the children’s schooling, and for the balance to be invested to replace the deceased’s salary to help maintain their family’s standard of living.
*Insurance cover is subject to eligibility criteria.
1 ABS (2011) Population Clock, www.abs.gov.au/ausstats/abs, viewed 12 March 2012.
2 AIHW (2008) Cancer in Australia: an overview 2008, Cancer series no. 46, Cat. no. CAN 42, Canberra.
3 Australian Government (August 2008) Road Deaths Australia: 2007 Statistical Summary, Road safety report no.1, Department of Infrastructure, Transport, Regional Development and Local Government, Canberra.
4 AIHW (2011) Cardiovascular disease: Australian facts 2011, Cardiovascular disease series no. 35, Cat. no. CVD 53, Canberra.
Disclaimer: This article is not legal advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every care has been taken in the preparation of this information, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Australian Unity Personal Financial Services Ltd is a registered tax (financial) adviser. Any views expressed are those of the author and do not represent the views of Australian Unity Personal Financial Services Ltd. If you intend to rely on any tax advice in this document you should seek advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in October 2017. © Copyright 2017