September Newsletter 2023

 

Footy Finals Fever is here and so is our September Newsletter. The winter chill is slowly retreating and making way for warmer Spring days, perfect for getting out in the garden or enjoying the great outdoors. 

This month we discuss buying insurance through your Super, how the Aussie dollar impacts your investments and some out of the ordinary holiday destinations to spark the travel bug.

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Value for money… from an insurance company?

In an age where the cost of living is rising and households are examining every expense, it’s easy to question insurance premiums.   While most people understand the requirement to protect valuable assets such as our home and car, we don’t often consider ourselves as an “asset” that requires protection.  Realising that YOU are the most important asset to protect shifts the thinking of insurance premiums being a “want spend” to a “need spend”, albeit a spend you hope you never need to claim on.

The next logical step is to look for ways to get value for money; to ultilise services or options that are built into your policy.  The personal insurance industry has evolved from it’s beginnings as a provider of life insurance only.  These days many personal insurance companies are focusing on health, wellness and recovery – all things which can help you avoid long term ill health.  This often means there are resources available to you at no additional cost that can help you live your best life.  For example, many MLC Insurance policy holders will automatically have access to Vivo benefits.  This is a network of services available to not only the policy holder, but the spouse, children and parents of the policy holder.  The service might connect you to a dietician or exercise physiologist to help you maintain your wellness and overall health.  It may be that you would like a second opinion for a recent medical diagnosis and your policy can connect you to a network of more than 50,000 leading specialists from Australia and around the world.  It may be that you need mental health support but don’t know where to start and your policy can connect you to a mental health support service able to ease your concerns or lay out the steps for you to access a suitable treatment plan.   There are a wide range of services available, all at no additional cost.  And it’s not just MLC, other personal insurance companies provide additional service offerings designed at wellness, such as AIA Vitality or TAL Health Sense programs.

No matter which company, personal insurance claim statistics will tell you the same story.  The leading causes of claims are cancer, musculoskeletal issues, accidents, mental health and cardiovascular conditions.  The millions of Australians who made these claims didn’t invite the illness or event that lead to their claim, and while there are some instances where lifestyle may impact a diagnosis, it’s just a risk of life that sometimes ill health can happen.  If you’re one of the smart ones who holds a personal insurance policy that protects YOU and YOUR FAMILY financially, make sure you take advantage of everything on offer to you that helps you stay healthy and active longer. It’s how you will achieve value for money.

Is it time to review your life insurance cover?

As we move through life and our circumstances change, it is important to remember to review your life insurance cover to ensure it is the right fit for you. Your life insurance is flexible and can be adapted to your changing needs so setting a yearly reminder for yourself to check in with your Financial Adviser is one action you can take to prevent falling into the underinsurance trap.

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February Newsletter 2023

The year is off to a great start with the return of the Cadel Evans Great Ocean Road Race to the region and the Festival of Sails attracting visitors from all over boosting our local economy.

In this month’s newsletter we explore some tips on how to best prepare for retirement and avoid some of the common mistakes people often make. We also look into raising resilient kids and how to best equip them with the skills to navigate difficulties and stepped vs. level premiums for life insurance.

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Future Proofing Your Home and Finances

Future-proofing is the process of anticipating the future and developing methods of minimizing the effects of shocks and stresses of future events.

https://en.wikipedia.org/wiki/Future-proof

Reading the recent federal budget, the term ‘Future Proofing’ was applied to the strategies that were to be implemented to ensure the nation is protected against whatever the future may bring. As individuals we could take this term and apply it to our homes, finances, and lifestyles too, developing strategies to future proof against the inevitable ‘shocks and stressors’ that will arise.

One of the most obvious strategies in Future Proofing our homes is Insurance, however while this sounds straightforward it is worth noting that when it comes to insuring our homes and buildings, replacement construction costs have risen by 12.3% over the 12 months to September 2022. This has resulted in close to 80% of homeowners being under insured.

To Future Proof against under insurance, a good place to start is to accurately calculate your replacement building costs and reassess annually. Insurance companies provide online Building Insurance Calculators that will estimate the cost of rebuilding your home based on data that they have received from recent sales and construction in your suburb or region. Also, it is worth investigating total replacement cover or ‘safety net’ cover, as while this may be more expensive it will allow for fluctuations and changes in replacement costs.

Understand and check exclusions, homes insurance covers loss and damage caused by defined events, such as fire, flood, storm, or vandalism. However, it may not necessarily cover landslides, sea damage or power failures. Future Proof by reviewing your policy and knowing how much your excess is (the amount you pay if you make a claim on your policy) and make an assessment whether it would be best to pay more to have a lower excess or pay less to have a higher excess.

Future proofing our home does not stop with house insurance, as it is worth noting that 67% (6.2 million) households are homeowners. 32% without a mortgage and 35% with a mortgage. Having a mortgage on your house will obviously require you to pay monthly repayments, but even without a mortgage you will still need to cover maintenance, rates and running costs. Income Protection Insurance may be the perfect solution to Future Proofing your income against the stressors caused by accidents or illnesses, which can result in people not having the ability to earn an income and pay their mortgages and maintain their homes.
https://www.incomesolutions.com.au/keeping-financial-calm-when-your-health-is-under-threat/

While the concept of future proofing is outlined when it comes to our homes, it can also be applied more broadly to our finances. By working with the support of a qualified financial planner and focusing on what you can control, staying invested, accepting volatility, and understanding the importance of diversification, a financial future that is future proof is possible.

Referenced for this article:

https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure
https://insurancecouncil.com.au/resource/know-your-worth-and-avoid-underinsurance/
https://moneysmart.gov.au/home-insurance/choosing-home-insurance
https://www.corelogic.com.au/news-research/reports/cordell-construction-cost-index

KEEPING FINANCIAL CALM WHEN YOUR HEALTH IS UNDER THREAT

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When recently out for dinner a concerned friend confided that a close friend, a plumber, had recently been diagnosed with a serious illness that required him to take time out of the workforce for extended lifesaving treatment. In outlining some of the details they explained how proud and relieved he was that he had income protection in place to eliminate financial stress and to continue to support himself and his family.

Apparently, he calmly contacted his clients and let them know that he would not be available as his health and medical treatment required his full attention. It was explained that this was a huge weight of his mind, but he also relayed that a few years previous he was advised to cancel his income protection or at least lower the payout figure. He refused on both counts as at the time he had to foresight to understand that if ever he had a serious illness, he would not be in the position to run his business and earn an income.

What comes across in this persons story was that in a time of great uncertainty and sickness, he felt empowered by his choices and decision to financially protect his assets, lifestyle, and family. He was not required to try and work to earn money between treatments or seek outside financial assistance from family or community and this ensured he felt in control and ready to focus his full attention on the task of staying alive and getting well.

While the above might be simply recounting a one-off case, in a recent visit to our offices by TAL Insurance, it was outlined that out of every one thousand income protection policies sold, 40 are claimed upon resulting in billions of dollars being paid out to sick or injured individuals. These individuals will have had their own unique stories, diagnosis and long term expected outcomes. However, they will all have in common similar feelings of relief and peace of mind knowing they have ensured their continued income is protected, and financial stress will not be contributing to an already challenging situation.

The impact of this peace of mind on our health and recovery is extremely important:

What is important for patients is that the reduction of stress may very well improve chances for recovery, improve quality of life, and provide an opportunity for greater participation in total treatment.

Stanford Medicine,
Stanford Medicine Surviving Cancer Article

At Income Solutions we know there are dual benefits to income protection, firstly providing an income for lifestyle and essential expenses such as mortgage, rent and loan repayments, and secondly creating a sense of wellbeing and financial security when you may need it most.

As a principal element of an overall financial plan, Income Solutions is committed to assisting our clients in putting in place affordable and relevant long term income protection.

Referenced for this article:

TAL’s Suite of Income Protection Products (1)

LIFE INSURANCE TO PROTECT YOUR SPOUSE, CHILDREN……. and PARENTS

For over three decades, we have been providing advice about building and protecting the wealth of our clients.  One of our client service offerings is a “family tree” discussion.  On the surface, this discussion addresses the correct transfer of wealth to beneficiaries.  Following the tree imagery, this is the money transferring from the top of the tree down into the branches, or family members.

In this article we want to explore what happens when money flows in the opposite direction, from the bottom branches and works it’s way up to the top of the tree.  This can be a devastating destroyer of wealth that is often triggered by sudden events that are full of emotion.  It can have as much impact upon a client’s retirement as a bad investment decision or an economic downturn.

We often hear of situations where one child suffers from an addiction or illness and grandparents suddenly becoming full time carers for their grandchildren.  Other times, it will be providing financial support for one child who repeatedly makes bad financial decisions and always needs to be bailed out.  Sometimes it might be a child applying emotional pressure on a parent to become guarantor on a home loan or to supply a lump sum for a home loan deposit.    Some of these situations can be avoided others cannot, but they are obvious examples of people placing financial strain on their extended family members and parents.

However, what we often do not hear about is the less obvious which was highlighted when a client contacted Income Solutions to make a withdrawal from their retirement savings.  Their son’s wife had died unexpectedly.  The son and his wife had a mortgage and three small children.  Their son was a stay at home father and as a result, there was no income coming into the family now.  Upon investigation, it was discovered that the son had a medical condition making it unlikely he would be able to secure work.  The son’s income needs therefore extend beyond the time frame of caring for young children and expanded to the full term of his working life.  The daughter in law had earnt an above average salary and was on a steady career projectory, allowing the family to enjoy a comfortable lifestyle.  This had provided our clients with the illusion that their son and his family were financially secure.  As it turns out, the son did not have any significant savings and as a family they had never put in place any additional protection cover.  Their theory was that they would put every spare cent they had into reducing their mortgage and they did not want to be paying money on insurance premiums they’d likely never need.  The wife had a small amount of life insurance held within her employer super fund, based at the default amount of cover for her age, and a modest account balance held within the employer super account.  This was enough to partially pay down the mortgage, leaving a much smaller debt but no ongoing income support for the surviving husband to pay down the remaining balance, let alone cover the family living costs. 

Retired parents should consider asking about the financial protections adult children have put in place for themselves.  This is especially relevant when they have a young family of their own.  Often pride dictates an answer “my son is doing really well, he’ll have that sorted”.  Other times, our clients don’t know, haven’t thought to have the conversation with their children or feel they are over-stepping the mark if they ask their children about their finances.   Our client in this example fell into the “doing well and will have that sorted” category when we asked about their children’s personal protections.  It is not our place to take things further and that’s where it lay. 

The one thing that is commonplace amongst all parents we see is that they love their children and grandchildren.   Of course, our client stepped up to help their child in need.  The result is that our client has steadily withdrawn funds to improve their son’s situation.  The issues that stem from this one, unexpected event are many:

  • Our clients were just on target to meet their financial retirement goals.  They no longer are on target and needed to reduce their personal spending accordingly.  Their living costs have risen however, because they are no longer just supporting themselves but are also buying necessities for their grandchildren, such as new clothes and covering costs for school excursions. 
  • Our client’s lifestyle goals in retirement are now changed because they need to provide additional help to their son and his young children.  They love all of their grandchildren equally and it ways heavily upon them that they have limited time available to spend with their grandchildren from their other children. 
  • Our clients have 5 children in total and always intended to distribute their estate equally between all 5.  However, now they know they have provided a large benefit to one child, which is to the financial detriment of their remaining children.  They are retired and they have no way of replenishing these funds to compensate their remaining children.  They are fearful that this will cause resentment amongst their other children.

Ensuring that you have invested in adequate Life Insurance in its many forms does not just protect yourself, your children and spouse, it protects your extended family members too.   It is important as adults with dependants and financial responsibilities that we do everything within our power to ensure we do not place an unfair financial burden on our older parents or family members.   Taking out comprehensive life cover according to our individual needs is core to achieving we never place our wider family members or parents in a financially precarious position.

Income Solutions offers a 4 step process that is free of charge and allows us to demonstrate the advantages of obtaining financial advice.  If you or a family member would like to find out more, please contact Income Solutions at www.incomesolutions.com.au  

Unintended Consequences of the ‘Stress Sickie’

Lee Nickelson is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

The term ‘take a sickie’ has been part of the Australian vernacular for generations, with many thinking it is their god given right after a big weekend to take an extra recovery day or two before heading back to work. Since employers have cottoned on to this phenomenon, many now request a medical certificate forcing a trip to the doctors and a medical reason for the absence. No harm.. surely?!

What many of us have been slow to realise is that these medical certificate trips are recorded on our medical history, which are commonly requested by insurers to make assessments both when applying for insurance cover and at the time of a claim.

A few trips to the doctor citing stress in order to get some time off work could result in an insurer putting an exclusion on all mental health conditions when they offer you cover. Or worse, a group insurer could use these doctor’s visits as proof of a pre-existing condition and then knock back a legitimate mental health claim in the future.

Another interesting learning I have come across when implementing insurance plans for clients are the instances where doctors’ reports do not match with the recollections of the patient. Many doctors are unaware of the consequences of writing ‘discussed feelings of depression’ when it could have been a more general conversation without a medical diagnosis. An insurer underwriting again may infer this as evidence of a pre-existing or recurring condition when it could have been a discussion of state of mind at the time.

It is all the more important to pay attention to how we interact with our medical records, including what we see our doctor’s for, what notes they actually write down during the consultation and who has access to those records going forward, because of the Governments new My Health Record initiative.

A My Health Record will be created for every Australian after 31st January 2019 unless you opt out. The record is designed to be a central place medical professionals can view your medical conditions, treatments, medicine details, allergies and test or result scans.

I encourage all Australians to take charge of your medical history, be aware of the implications of seeing a doctor on future insurance applications, and head to the My Health Record website before 31st January 2019 to make a decision for yourself whether a digital health record is right for you. https://www.myhealthrecord.gov.au/for-you-your-family

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.

Insuring Your Most Valuable Asset

There is a good chance that your largest, most valuable asset is underinsured. It is not your car, it is not your home, it is your ability to generate an income. Income protection insurance can replace up to 75% of your income through your inability to work due to injury or illness. Knowing what cover is appropriate for yourself is an important step in safeguarding your financial life goals. If there are people dependant on you to provide an income, we recommend a review of your existing insurance cover.

Many Australians may not be concerned with insuring their largest financial asset, as it does not immediately impact them. A 2015 report completed by Rice Warner ‘Underinsurance in Australia’ states that, existing levels of Income Protection Insurance for Australians only meets 16% of their needs.

It is possible that you have some default cover within your Superannuation account.

This can be checked by calling you Superannuation provider or reading your Annual Superannuation Statement.

However, this level of cover may only provide you with Income Replacement for a period of two years. There is a possibility that you might not be able to return to work after a period of two years.

  • What then?
  • Can you still achieve your personal financial goals with no income?
  • What happens if you cannot work because of injury or illness?
  • Where will you get an income to meet your daily living expenses?

These are important questions you should ask yourself if others rely on you to provide for them. The best time to act is now.

By taking the time to talk to a Financial Advisor or completing an online insurance calculator you can determine what cover amounts and period is sustainable for your needs.

Do not put others in a worse off position because you did not take the time out to check what level of cover is appropriate for you.

Rice Warner. (2018). Australia’s relentless underinsurance gap. [online] Available at: https://www.ricewarner.com/australias-relentless-underinsurance-gap/
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way

Income Protection Insurance

Gareth Daniels from Income Solutions

Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee 

Are you looking at purchasing your first home or planning on starting a family soon? If so this is the perfect time to look at getting an income protection insurance policy in place or re-evaluating your current policy.

Buying a new home or starting a family, or both, is such an exciting time and you’re probably getting lots of different opinions from family and friends on what you should be doing, so let’s break down the facts.

What is Income Protection Insurance?

Essentially, it pays up to 75% of your income if you are unable to work due to injury or illness. If you have debt, dependants, or both. We all know that whether your income is coming in or not, the bills still need to be paid. It is advisable to have income protection insurance to help pay those bills and support your loved ones in unforeseen circumstances.

When paying your income protection insurance, you have main 2 options, paying through your superannuation fund or paying directly from your income.

Paying through your super fund

If you choose to pay your income protection through your super fund, it will cover the premium giving you more money in your pocket to pay for other things. This strategy is useful if you are trying to pay down your mortgage or have school fees to pay as the premium is coming from your superannuation, not your wage, so there is more money in your pocket to pay down your mortgage or pay for childcare or school fees.

However, there can be some restrictions on claims, dependant on your policy, we advise that you speak to your financial advisor to clarify these specifics.

Paying income protection from your wage

Alternatively, you can pay your premium straight from your wage, and in many cases, this can prove a greater tax deduction compared to the tax rebate that will be paid into your super fund.

For example, take the average Australian wage of $60,000. This person will pay around 32.5% tax each financial year (not including the Medicare levy). If they pay their income protection insurance from their wage they will get back about 32.5% of that premium at tax time.

How do I know if I have the right cover?

These days everyone has a super fund, and you may have a level of income protection insurance by default, however this policy may not be right for your personal situation. So, feel free to grab your super fund statement and come in for a coffee and a chat and we can look at the right coverage for your current situation.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. 

Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

 

 

 

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