What is Insurance?
Insurance creates a financial safety net that protects yourself as well as your family and your assets when you need it most.
Insurance allows you to replace or repair assets. This includes belongings such as your car and your home. It also includes your most important asset- you.
Insurance can provide financial support should you no longer be able to earn an income to support yourself or your family.
There are various types of insurance to meet different needs. The qualities you need in your insurance will continue to alter throughout your life as your circumstances change.
At Leap Financial, we can help you identify the insurance policies which will provide you with the protection you need.
What types of insurance do I need?
There are numerous types of insurance on offer and what you need will depend on your individual circumstances.
Car or home/ contents insurance protects you from the damage or loss of your belongings. The right car, home or content insurance allows you to maintain your lifestyle after unexpected emergency events such as an accident or theft. With Leap Financial you can find and tailor your insurance plans to get the best cover for your belongings.
Personal insurance policies insure your greatest asset – yourself. Personal insurance provides cover for a range of areas including sickness, injury and death. Insurance can’t remove the chance of something going wrong, but it can remove or lessen the financial burden you and your family would experience should the unexpected happen. At times of sickness, injury or death, insurance can provide financial stability.
The amount or level of insurance you will need will vary over time as changes occur in your income, your assets, your personal relationships and your lifestyle.
Looking in depth at these types of insurances:
This insurance secures your family’s financial future for when you are no longer around and contributing to your family’s income. Life insurance pays a lump sum to your family should you die. This lump payment will assist in paying regular expenses including your mortgage, school fees and household expenses.
A common misconception is that life insurance will only be available to a family’s primary income earner. In reality, the person who is primarily responsible for caring for the family is a large contributor to the home and can also be covered by life insurance.
You can take out life insurance inside or outside superannuation. There are pros and cons to each option.
Your employer has an obligation to offer you a superfund that will provide you with a minimum level of cover for death. You can accept this cover, increase the level of your cover or choose not to have this cover.
Total Permanent Disability (TPD) Insurance
Similarly to life insurance, TPD cover pays a lump sum to you if you become disabled before you retire and will be unable to work again, or can’t work in your occupation or chosen field. This lump payment assists with paying for any medical and rehabilitation costs you’ll require. It will also assist in paying for everyday living expenses and outstanding payments such as mortgages, loans and school fees.
TPD insurance can be purchased as an add-on to life insurance. Alternatively, it can be purchased as a standalone product. It can also be added as a benefit in your super fund.
TPD insurance is also treated differently with regards to tax depending on if it is purchased outside or inside of your super. Outside of super premiums are not tax deductible and the benefit payment is tax free if it’s paid to the person injured or their relative. Inside of super premiums are tax deductible for the super fund generally. However the benefit payment you receive may be taxed.
Trauma insurance, also known as Critical Illness Insurance, works to ease the financial burden of major expenses if you suffer a catastrophic illness or injury.
Recent and continued advances in medical treatment have meant that people are far more likely to survive illness and injury, though of course medical treatment may incur a substantial cost. If you have Trauma insurance in place you can avoid the stress of having to pay large sums for medical treatment and instead focus on recovery.
Income Protection Insurance
Regular payments for rent, mortgage and household bills are not going to be put on hold if you’re unable to work after becoming sick or injured. If you are unable to work due to a medical ailment you will also likely have additional medical expenses. Income protection insurance, which is also known as salary continuance or income replacement, provides monthly payments to replace lost income when you are unable to work due to injury or sickness. This benefit can assist you in paying your day to day expenses as well as medical expenses while you recover.
A few quick FAQs:
– The maximum cover you can receive from Income Protection insurance is generally 75 per cent of your gross wage.
– The period in which you receive the benefit is variable. Generally, the longer the benefit period the higher the premium will be.
– Income protection insurance can be purchased through your superfund or you can purchase it as a standalone policy.
– Premiums for Income protection insurance are generally tax deductible. The payments received are treated as income and so are taxed accordingly.
So should I get insurance within my superfund?
Superannuation can provide you with Life, TPD and Income protection insurance. The cost of the premiums for these different insurance policies is automatically debited from your superannuation balance if you choose to take out insurance with your super. Depending on your needs, getting insurance within superannuation, outside of superannuation or through a combination of the two may be best.
It is important to keep your insurance up to date as your needs will change as you go through life. At Leap Financial we regularly review your insurance as part of our financial advice process. This ensures that you are getting the cover you need as your circumstances continue to change.