Insurers have caught onto the rising pressure of living expenses, so they now offer new funding methods that can remove the burden of insurance from your monthly pay packet. For many with tight budgets, where one adult has temporarily stopped working to raise children, adequate Insurance is seen as a superfluous item and never taken out, even when large debts are taken on to finance the family home. This is a big risk for a family, so there are alternate ways to fund protection that you should explore.
What’s the answer? How do we afford insurance?
It is often said that the only constant in the Financial Services Industry and even life, is change. Due to constantly evolving government legislation, client requirements and industry developments, Insurance and Investment products are always evolving. To maintain competitiveness, some insurers are allowing insurance premiums to be fully or partially funded through superannuation, thus allowing you to become insured, but removing a large part of the out of pocket expense. Funding Insurance premiums through Superannuation has been an option for quite some time, but often clients would end up sacrificing the strength of the policy in order to avoid costs.
Are there any catches?
In some instances, a policy fully funded by super can ‘weaken’ your policy because they don’t offer the same features as policies outside of Super, or there is a conflict with the rules and guidelines of the Superannuation environment. For example; you are unable to acquire own occupation total and permanent disability cover or, agreed value income protection exclusively through super. What this means is, if you were to be totally and permanently disabled but only had 'any' occupation cover, your TPD may not pay if you are still able to do another job type.
How does partial payments work?
Given that you have already paid tax at your marginal rate on the money that’s in your wallet, people want to spend as little as possible on Insurance premiums. This flexi-linked fee structure allows clients to split many different types of Insurance, including Income Protection. A financial planner can review your specific scenario and provide formal advice on how best to structure a split paid policy premium, if that is determined to be the best option for you.
When doesn't it work?
This will depend on the level of Super Contributions being made, and the recommended level of cover that you need. In the end Superannuation is a means of funding our own retirement, and should be used as such. A Financial Planners role is to provide recommendations so that you can benefit from the Financial Products available, and understand the sometimes complex frameworks of Superannuation and Insurance.
For any Insurance queries, or to organise a review of your Superannuation, Investments and Insurance please contact me on firstname.lastname@example.org