What does automatic insurance inside super really cover you for?

Everyone realises the importance of insuring their car and home, however many seem to overlook the importance of insuring their means to make a living and maintain their lifestyle. Many new clients we meet often tell us they have insurance as part of their super fund and assume that it will meet their needs and be available if they ever need to make a claim. Some of these clients were unaware of what they really had and just assumed that all super funds incorporated insurance cover such as life, TPD and income protection – this is definitely not the case. In fact, most new clients we meet are underinsured for their individual needs and often rely heavily on automatic insurance cover which is usually given to new members of a super fund.

What is automatic default cover?

Automatic (default) cover is insurance that you never applied for yourself, or completed an underwriting assessment to acquire. The cover is typically included with a new super fund account when you sign up as a new member, usually when you join through a new employer sponsored fund. It’s important to note that not all super funds give you automatic cover and you should never assume you have it.

Automatic cover within super funds can also change insurers or terms of the policy at any time, which could result in a disadvantage to you.

Is the cover you have currently enough?

The second major issue with automatic cover is the amount of insurance you are given is generally a one-size-fits-all approach that doesn’t take any of your personal circumstances into consideration.

For example, people with automatic cover could be issued one hundred thousand dollars of life and TPD insurance, and maybe a few thousand dollars a month in income protection which will usually pay a benefit for a maximum of two years. The problem with this approach is that everyone earns different salaries and has different amounts of debt, which will alter the amount of cover needed. If someone couldn’t return to work ever again due to an illness or accident and they were expecting to work for another 25 years, most automatic income protection policies would only replace their income for a maximum of 2 years. What would that person do for the remaining 23 years of lost income? Would one wage cover everything that household needed or would the family (or spouse) be forced to completely change their way of life? This situation may seem unlikely, but it happens every day to people who think they are healthy.

Can you have a quality policy which is underwritten and still funded by super?

Yes, you can have insurance policies which are underwritten at the time of application inside super. You can also opt for more comprehensive policies which are mostly funded by super, with a small portion of the premium paid outside of super for the comprehensive extras (as per current SIS Act legislation). Your personal circumstances, goals and objectives will also determine the suitability of the recommended structure.

Want to know more about quality protection?

Seeking advice about what cover will best suits your needs is very important as not all policies are equal. An adviser can help you identify what level of cover meet your individual needs and will find a solution which fits your budget. Our advice services will look at multiple quality providers which will give you confidence in knowing the cover is in place, should you need to ever make a claim.

Contact us today for a free financial health check which will examine your current financial situation and ensure your insurance needs are being met.

When is the right time to seek financial advice?

There’s no bad time to seek financial advice, however here are five situations where it’s more important than ever to see a financial adviser.

If you think financial advice is just about helping you save more for your retirement, think again. No matter where you are in life, getting quality financial advice can help put you in the best possible place to achieve your life goals, and protect you if things don’t go to plan.

Here’s how your adviser can help you through some of life’s big events.

1. Moving in with your partner

Starting a new relationship can be an exciting time – and it can be easy to get carried away. As you start your life together, a financial adviser can help you plan a new budget, so you can start saving for mutual goals.

Your adviser can also make sure you’re both protected with adequate insurance – something that’s particularly important if you have joint debt or children.

2. Setting up house

These days, buying your first home is harder than ever, with property prices at record highs in most Australian cities. An adviser can help you create a realistic plan to save for a deposit, helping you get your start in the property market.

Once you’ve found the right property, your adviser can help you choose a mortgage and manage your repayments – potentially saving you thousands of dollars in interest over the life of your loan.

3. Ending a relationship

Not every relationship lasts, and break ups can be painful – and often financially detrimental.

Your adviser can help you realign your goals and provide financial structure during a very stressful time. They can also help you get your finances back on track, with a budget to suit your new situation and lifestyle.

4. Changing direction

It’s unlikely that you’ll stay with the same job for your entire lifetime. So if you’re thinking of changing your workplace or embarking on a new career, it’s time to sit down with your adviser. They can help you understand the financial implications of working less, or help you make the most of a promotion or pay increase.

If you’re nearing retirement, you may want to discuss a transition to retirement strategy, so you can spend less time in the office and more time at home. Or if you want to be your own boss, make sure you talk to your adviser about making tax-effective contributions to your super, so you don’t retire without a nest egg.

5. Taking time out

There may be times in your life when commitments like parenting, taking care of elderly parents, studying or travelling will take priority over full time work.

If you’re planning on taking a break from work, your adviser can help you understand your financial options for funding this time off. Remember that while you’re not working you won’t receive any employer contributions to your super. So it’s important to talk to your adviser to help make sure your retirement savings don’t fall behind.

Financial Advice: Costs vs Benefits

Most people delay or don’t seek advice about their finances until much later in life. Many people feel like you need to have a large lump sum of money to invest or be ready to retire to benefit from financial advice. This could not be further from the truth, and in some cases people wait too long or wish they had sought advice years before they actually had, especially after seeing the benefits it can bring.

When you first meet with a financial adviser, they will look at your current situation and help you identify what you hope to achieve from the advice. This may include reducing your personal tax, growing your savings faster, reducing your debts more quickly, buying a property, or preparing for retirement. Benefits can be seen in all stages of life by seeking advice and the sooner you start, the smaller the sacrifices are to meet the same objective.

It doesn’t matter if you’re a young professional looking to maximise savings to buy your first home, a young family looking to provide for your children’s education, or a couple wanting to make their money last throughout retirement; there are benefits for everyone who seek financial advice.

Costs

Our fee structure is set on a fee-for-service basis which means after the free initial consultation, we agree on a price for the advice based on the amount of time it will take to research and prepare a strategy that is tailored to your needs. If you decide to proceed, we construct the advice into a report called a Statement of Advice detailing proposed strategies and options of products from different providers, along with complete disclosure of costs for each option. The cost to prepare this document starts from $2,200 and can increase depending on the complexity and time it takes to prepare.

In the next meeting we will go through the report and answer any questions you may have in regards to the advice proposed so you can make informed decisions on the strategies and products presented for your particular circumstances.

Benefits

In some cases the cost of the advice is less than the benefits people see within the first year. Our clients often tell us they wish they’d sought advice years before because they would be in a much better position now. These benefits include maximising savings, reducing the amount of tax you are required to pay through tax-effective strategies, paying off your mortgage sooner, growing your investment portfolio, reducing personal insurance premiums, or just having a sense of confidence knowing you're on track to realising your financial goals.

If you would like to find out more about how we can help you, contact us to arrange a free consultation.