Need help navigating insurance? Start here
Life takes twists and turns that we can’t always see coming. That’s why it’s important that we have a clear plan and support system ready when we need it.
An accident, sickness or death of a loved one will almost always have a significant impact on the financial circumstances of the family. Having the right insurances in place can help protect your family and your income if the unexpected occurs.
It’s difficult to know where to start when it comes to insurance. The first step is to get to know what the different types of cover available. Under the broad heading of life insurance there are four distinct types of insurance:
Types of Insurance
Death cover (aka Life cover) – Pays a set amount of money when you pass away. The money will go to the people you nominate as beneficiaries on your policy and can be held within superannuation, although, there can be tax consequences depending on who you leave it to.
Total and Permanent Disability (TPD) cover – In the event you become totally and permanently disabled as the result of an accident or illness, this cover will pay you a set amount. Usually, this will cover the costs of rehabilitation, debt repayments and the future cost of living. TPD cover is often bundled together with death cover and depending on the type of TPD cover, it can be held within super. Your insurer will define TPD as either when you can’t work again in any occupation, or can’t work in your usual occupation.
Trauma cover – Pays you a set amount or lump sum if you are diagnosed with a specified illness or injury. These policies include the major illnesses that will make a significant impact on your life, such as cancer, heart attack or stroke. It is also referred to as ‘critical illness’ cover or ‘recovery’ insurance.
Income protection – This helps to replace the income lost when you’re unable to work because of temporary or permanent disability. Often people will elect to insure 75% of their income so that in the event you have to claim income protection you will continue to be paid 75% of your salary – even helping you to continue to pay your super contributions so that your retirement assets are still growing.
So we know what each of the terms means and covers now but how do you know if they’re the right ones for you?
Get to Know How Your Insurance is Structured
How do you hold your insurance?
It could be through your superannuation or held personally, or you could have a mix of both. Many people don’t realise that you can’t get all of these insurances within your super – for instance, trauma sits outside of superannuation. However, it can be a useful way to split your premiums between your personal cash flow and your superannuation balance.
What is your premium structure?
A stepped policy provides a lower premium initially but steps up as your age increases. A level policy will initially be more expensive but remain more stable throughout the years if you need to retain it for a long period of time.
Do you have to choose the insurance your super fund offers?
No. You don’t have to choose the insurance your super fund offers. Most super funds will accept the request for premium payments from any insurance provider, as long as the type of insurance held does not breach the superannuation legislation.
What type of income protection do you have?
Consider if the cover you have will still pay the agreed figure even if you’re not working for a period of time. It’s important to ask these questions so that you’re not paying for a policy that you may not be able to claim on when you need it.
Other Tips for Navigating Insurance
If you are the primary carer, is your role in the family insured? If you are not the main income earner, is your partner income protected? Whilst the primary carer does not bring dollars into the household at that point in time, their insurance needs may not be any lesser than the primary income earner. If the primary carer became unable to care for the family, would the family unit be able to survive financially having to employ someone to support in taking on their role?
Be cautious of advertisements offering disability cover with no medical checks. This type of cover can be very limiting – this is often why it is cheap.
To find out what life insurance you have with your super, either call your super fund, check your annual super statement or access your super account online. Things to check are what type of insurance cover you have, how much cover you have, and how much you are paying for the cover.
You should also find out how your super fund is calculating your insurance premiums. For example, if your super fund has classified you as a smoker or blue-collar worker, and these risk characteristics aren’t relevant to you, you could be paying more for your insurance than you need to.
About the author — Alysia Laird
Insurance can be tricky and if you still have further questions Verve has partnered with an Insurance expert to help demystify the options and process of securing life insurance. Alysia Laird, Founder of Zebra Tailored Wealth is experienced in supporting women to build wealth at all stages of life — she also loves to talk insurance. If you’d like to book a session with Alysia, an Insurance expert you can do so here. This is not personal financial advice, however, Alysia is a financial advisor and if you would like to engage her for these services you can do so independently of Verve Super.
This blog is published by Verve Superannuation Pty Ltd (ABN 65 628 675 169, AFS Representative No. 001268903), which is a Corporate Authorised Representative of True Oak Investments Ltd (ABN 81 002 558 956, AFSL 238184), as the Sub-Promoter of Verve Super.
Verve Superannuation Pty Ltd and True Oak Investments Ltd are not licensed to provide personal financial advice. The information contained in this blog, including any financial guidance, is general in nature. You should consider seeking independent legal, financial, taxation or other advice to ensure that your financial decisions are suited to your unique circumstances.
You should read the Product Disclosure Statement, Additional Information Booklet, Insurance Guide, Target Market Determination and Financial Services Guide before making a decision to acquire, hold or continue to hold an interest in Verve Super. When considering financial returns, past performance is not indicative of future performance.