Important considerations

As an important part of wealth protection, you should consider the following:

Should I get my risk insurance within my super fund?

Many superannuation funds will provide you with the option of purchasing insurance through their products, you can potentially benefit from tax deductions and cheaper costs when you hold insurance within a superannuation fund. However, there is often a wider choice of insurance cover available outside of your superannuation fund, and the payment of your benefits may be processed quicker.

Understanding insurance definitions

It is important to understand your cover, as it may help you avoid any complications if you or your estate needs to make a claim. You should read and understand the Product Disclosure Statement along with the entire policy document. If there’s something you are unsure about, ask your financial adviser to clarify it for you.

How much cover do I need and what type?

You should ensure your cover is adequate and that you are not over or, under insured. The kind of risk insurance that you need depends on a number of factors such as your:

• Age;
• Lifestyle needs;
• Dependants; and
• Personal financial circumstances and objectives.

It’s not just the breadwinner who needs risk insurance

Families typically insure the breadwinner, but many do not insure the home-maker. However if the home-maker dies and is not insured, the breadwinner and their children could be left financially vulnerable. Could the breadwinner afford to take extended time off work or take a less demanding but lower paying job so they can look after the children? Or could the breadwinner afford to hire a nanny to look after the children?

If the home-maker suffers a trauma and is not insured, could the breadwinner afford to pay the entire medical and rehabilitation costs? Or take extended time off work so they can look after the spouse? Or hire a nurse for the spouse?

The importance of policy ownership

Ownership of the policy is an important consideration. For example, if you are the ‘life insured’ and sole owner of the policy, the proceeds would form part of your estate which may take weeks or months to be resolved. If the policy is jointly owned with your partner, then the claim would be paid directly to them upon your death.

Apart from owning a policy by yourself or with your partner, a policy can also be owned by your business partner, your private company or trust, or your superannuation fund on your behalf. This allows for the insurance to be set up for specific purposes, for example, to allow a business partner to buy out a deceased partner’s share of the business.

As your wealth grows and personal circumstances change, your need for insurance cover may also change, so it’s important to review your insurance cover regularly.

A Consultum financial adviser can help you assess your insurance needs as part of your overall financial plan. Let us help you find an adviser near you.