Financial Planning Adelaide

What does automatic insurance inside super really cover you for?

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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.

So what is automatic cover and why shouldn’t you rely on it?

Automatic 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. Not all super funds give you automatic cover and you should never assume you have it.

The difference between automatic cover and underwritten cover can be night and day should you ever need to make a claim. The main reason is because the automatic cover was given to individuals without assessing their medical history, current health, family history, medications, or previous injuries before it was issued. Instead the underwriting assessment is done at the time of claim, which can present a huge range of complications and additional stress to the insured person/person’s family when they are most vulnerable and in need of the insured amount. In some cases this can result in a claim being declined as the automatic cover provider wouldn’t have accepted the policy if they had known about the conditions when the insurance was first issued.

On the other hand, an insurance policy which has gone through an underwriting assessment at the time of application and issued to the insured person cannot be altered by the insurer once it’s in force. The insured amount must be paid as long as the definitions of the policy are met. This means that you will have the cover in place as long as you continue to service the premiums, no matter what surprises or health concerns may happen in the future. In fact, you are placed in a better position than the insurer as you are the only one who can alter the policy once it’s in place – such as removing/reducing potential loadings or exclusions, or improving your occupation rating which will reduce your future premiums.

Is the cover you have currently enough?

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

For example, people with automatic cover are often issued a couple 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 quality 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).

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.

How a financial adviser can help in the lead up to retirement

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In the last five years before retirement, it’s important to plan for what’s next around the corner, including any changes you might be making as you approach this major milestone.

A financial adviser can help you define what it is you want to achieve in the lead up to retirement and afterwards. They can then give you the confidence and know-how to help you reach your goals.

So what’s on the horizon for you?

1.    Working out how you’ll fund your retirement

Now that retirement is getting closer, you’re probably looking for ways to grow your super savings. How you’ll access that money is also important, as it may affect the tax you pay. A financial adviser can help you:

  • Work out and implement strategies to boost your super.
  • Create saving plans and spending budgets.
  • Decide how to invest your super or other assets and choose investment types that suit you.
  • Choose the best retirement income streams for your financial situation.
  • Work out strategies that may increase your eligibility for the Age Pension.

2.    Selling an investment property

If you feel the time is right to sell, a financial adviser can help you:

  • Decide what to do with the proceeds of the sale.
  • Consider any implications of selling before or after retirement. For example, if you sell your investment property before you retire, the Capital Gains Tax (CGT) you pay may be higher than if you sell it after you retire.

3.    Downsizing or making a sea or tree change

If you’re considering moving into a smaller home or to the coast or country, a financial adviser can help you:

  • Understand any financial implications, such as your eligibility for the Age Pension. Your home is exempt from means testing, but your super and other investments may not be.
  • Budget for moving and buying costs.

4.    Transitioning to retirement

You may be able to take advantage of a transition to retirement strategy that lets you start drawing down your super while you continue to work full time or drop down to part time hours. A financial adviser can help you:

  • Make the most of the tax concessions available if you opt to work full-time, top up your super and draw a transition to retirement pension from your super.
  • Work out if you can afford to cut down your working hours and use a transition to retirement pension to top up your income.

5.    Planning your estate

Estate planning can be one of the most important things you can do to make sure your family is provided for. It’s more than just having a current will. Together with your legal adviser, a financial adviser can help you:

What fees and charges are involved with seeing an adviser?

The initial consultation is free of charge and gives you an opportunity to sit with an expert and identify what areas of advice will benefit your individual circumstances. If you decide to proceed with advice, preparation costs will be discussed and agreed upon before any work is commenced.

Advice costs generally depend on how complex your financial plan needs to be and the amount you have to invest. Whatever the charges, the financial adviser will explain them clearly when they take you through their Financial Services Guide (FSG) during the initial consultation.

Want to know more?

If you feel like you’d like to speak to a financial adviser about your retirement plans please contact us today on (08) 8372 7826 for an obligation-free consultation.

When is the right time to seek financial advice?

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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 good financial advice can help put you in the best possible place to achieve your life dreams, 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.