A recent article by Life Insurer TAL explored the payment of Life Insurance claim proceeds to a child or children under the age of 18 which highlights the significance of considering estate planning as part of designing a personal insurance program. The surviving legal guardian of the child may have the the ability to make financial decisions on behalf of the child which needs to be considered in the context of the deceased parents wishes.
From 1 July 2017, significant changes to superannuation, consequently impact insurance and succession planning strategies which may give rise to the need for reviewing of existing insurance and estate plans.
- Dependents can now choose from which super fund their pension commences by rolling over to their fund of choice.
- Limitations now apply on the ability to receive Life Insurance proceeds as pensions.
Life insurance is one of the most important investments you can make to protect your family’s future well being. And like any investment, it needs careful consideration.
Taking out too little or too much insurance can be costly. Failing to disclose all relevant information to an insurer could result in a claim being denied – possibly after years of paying premiums – just when you need help most.
Negotiating in good faith
Heartbreaking stories about insurance companies failing to pay out when a policyholder suffers an illness or injury get plenty of media attention. What’s often glossed over in these reports is that the company is within its legal rights to deny the claim.
In the unlikely event that you break a leg or, heaven forbid, die prematurely you and your family have got it covered, right? You’ve got life insurance care of your super fund, not to mention that pricey health insurance policy. And if worst comes to worst, there’s always a government pension to fall back on, isn’t there?
Actually, most Australians don’t have nearly enough insurance. The nation’s underinsurance gap has been estimated at a whopping 1.8 trillion dollars.i Part of the reason for that is the trio of misconceptions outlined above.
Let’s go through them one by one.
Whoever said, ‘the more things change the more they stay the same’, was dead wrong when it comes to life insurance. While protection against adversity is always wise, your actual needs change as you move through different ages and stages of life.
From when you take your first job and go out into the world, life
- Income protection – Pays a monthly benefit if you are unable to work due to sickness or injury
- Trauma – Pays a lump sum for a specific injury or illness
- Total and permanent disability (TPD) – Pays a lump sum if you are permanently unable to work
- Death – Pays a lump sum if you die or become terminally ill.
Life insurance is like a bell curve – you need a low level of cover when you are setting out life, growing to a high level in your middle years when your responsibilities and debts are at their peak and then possibly dropping back when you retire.