Written by Hudson Insurance Manager Susan Clarke
If the person insured passes away the insurance provider will assess the claim and pay the Life insurance benefit to the nominated beneficiaries.
When Life insurance is outside of superannuation the beneficiaries of your policy can in general, be whomever you choose, however, usually the nominated beneficiaries are the people financially reliant on you.
When Life insurance is owned by superannuation the nominated beneficiaries you may choose are restricted to nominating your Estate or persons who qualify as being financial dependents, such as your spouse.
Within superannuation, the trustee of the superannuation fund is the owner of the Life insurance policy and beneficiary nominations can either be Binding or Non-binding. The difference between the two is really that a Binding Nomination is a legally binding document and must be witnessed by two adults who are not beneficiaries to the policy.
The beneficiaries of your Life insurance should be aware of your policy as in the event of your passing it is likely that the beneficiaries will also be the people who contact Hudson Financial Planning or the insurance provider to make a claim on the policy. Obviously, if you nominate your Estate or Legal personal representative you must also have a valid Will in place.
If you would like to query who the nominated beneficiaries are on your Life insurance or if you need to update these please contact Hudson Financial Planning.
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Written by Hudson Adviser Phillip McGann
A must for all property owners is to make sure you have in place Landlords Protection insurance As the name suggests Landlords Insurance is an insurance policy that covers some of the risks arising out of being a Landlord.
Good tenants are usually the norm and flow from a good thorough selection process by a competent rental agent and good ongoing management there-in including regular inspections and a tight control of rental payments
However occasionally tenants do things they should not and that is where Landlords Insurance comes into its own
Landlord Insurance policies can cover off for events such as;
- wilful damage by a tenant to the property
- loss of rent if the tenant defaults on payments
- legal costs incurred in taking action against the tenant
Policies may well cover off on contents owned by the landlord but not those owned by the tenant.
I have come across a few (not a lot but enough) Hudson Members who have had to claim on their Landlord policies in the event of the tenant leaving the property in disrepair and with rent owing. The rental Bond (usually one months rent) will cover part of this cost but often not all of it and so having the safety valve of a dedicated insurance policy in place to cover off on the above issues is vitally important and a must for all landlords. And also it is tax deductible
The premium cost of Landlords insurance will vary widely depending on what the policy actually covers and what the rental income of the property is but a range of $250 to $550 per annum is reasonable If you are paying more than that or wish to get a guage of whether your current policy is reasonable then ring around. It is a very competitive market.
NOTE: This type of general insurance is NOT offered by the Hudson Insurance team.
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Written by Hudson Insurance Officer Sue Clarke
Part 1 – Life and Total Permanent Disablement (TPD)
Regulatory changes in the past few years mean that you are no longer restricted to the insurance arranged by your superannuation provider. Life insurance with or without a linked TPD benefit can be issued by an insurer who can request the premiums annually from an Australian compliant superannuation fund. The change is positive for Hudson members as it opens the insurance market for competitive premiums. But why have your insurance premiums paid from your superannuation account? Why Not?
The argument for Why includes the following reasons: -
1) Cash Flow – this is the primary reason for why Life insurance with or without a linked TPD benefit is paid from a superannuation account. Premium payment from a superannuation account frees the household budget from insurance costs.
2) Cost effective – when premiums are paid annually from a superannuation account the insurance provider passes on the 15% rebate applied when insurance premiums are paid via a partial rollover from a superannuation account.
3) Ease of Premium payment – the insurance provider will request the annual premium from your superannuation account. For many, this eases the burden of remembering to pay for an annual premium or remembering to update the payment details for premium collection if you have changed bank accounts or credit cards.
4) Stability of insurance – This is a big advantage for those who are employed on contracts or who work in occupations that are subject to periods of unstable employment. Having Life insurance with or without a linked TPD benefit means that should you cease employment your insurance cover does not stop, or lapse provided the annual premiums continue to be paid from your superannuation account.
5) Consolidation of insurance – Holding one Life insurance policy with or without a linked TPD benefit paid through your superannuation account allows consolidation of any additional Life/TPD insurances you may have within superannuation funds and saves the premiums that are being collected for the additional insurance covers. If you have multiple superannuation accounts you may have insurance covers attached to these accounts, if so, you are paying premiums for all the additional insurance covers.
The argument for Why Not:-
1) The erosion of your superannuation balance – this is especially relevant if the balance of your superannuation account is low and you disregard your insurance for a number of years. On stepped policies, insurance rises in cost each year due to a combination of factors including CPI accepted increases on the amounts of insurance, age indexation and any rate rises. All of this means that if you ignore your insurance for several years your once acceptable premiums may have increased considerably over time.
There are strategies to avoid the erosion of your super balance these include accepting your Hudson insurance review appointments each year enabling us to help you keep a check on the amount of insurance and the premiums each year. You may also wish to consider salary sacrificing into your superannuation account to offset the deduction made from your super to pay for your insurance premiums.
2) Tax – If you suffer an event or illness at under 60 years of age and claim on your TPD insurance held within superannuation, the TPD payment is taxed.
Life insurance will also be taxed if held within superannuation and your beneficiaries are adult non-dependents. This does not include your spouse but would include your adult non-dependent children meaning that your children may not come to receive the Life insurance benefit you planned for.
3) Slower payment of claim – When insurance is held within superannuation the trustee of the super fund approves the release of any insurance benefit. This is not to say that the insurance benefit will not be released but it may be a slower process than the realisation of a Life insurance benefit from a policy outside of superannuation as there is no trustee involved.
4) Cut off ages – Life insurance with or without a linked TPD benefit when within superannuation has expiry ages. Usually this is within the policy year that you turn 65.
Outside of superannuation, Life insurance can remain active until age beyond age 65.
5) Lapsed Beneficiary Nomination or No Beneficiary in place – If this is the case with your Life insurance the trustee of the superannuation will determine who receives your Life insurance benefit.
A strategy to avoid lapsed beneficiaries or not having nominated a beneficiary in place is to accept your annual Hudson review insurance appointments as this allows us to check this information for you.
As this article attempts to clarify, there are both advantages and disadvantages to holding Life insurance with or without a linked TPD benefit in superannuation. There is no one insurance solution that will suit everybody’s circumstances and insurance should never be a set and forget process as your insurance needs alter over time.
If you have any queries or wish to discuss the information provided in this article please contact Hudson Financial Planning to schedule a call with one of our insurance advisers.
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Written by Insurance Adviser Peter Dale
Has anybody ever heard the saying “insurance companies never pay up”? Well in my 45 years of working in the insurance industry I for one have certainly had the exact line repeated to me on numerous occasions.
The insurance department would like to share the past 18 years “claim experiences” with our members within our membership base.
1/ Death claims. We have lost 37 members during the last 18 years that had insurance policies with us, with the claim settlements totalling $17,904,825.
2/ Trauma claims. We have had 45 claims submitted during that time with a total settlement figure of $1,205,115. Note, ONE claim was denied (did not meet definition on policy).
3/ TPD (Total & Permanent Disability). 7 claims submitted and settled with payouts totalling $3,185,117.
4/ Income Protection. We have had 66 members claim with varying degrees of disability. As of today’s date many of these members are still receiving monthly benefits for ongoing claims. Amount paid to date is $5,220,689.
As you can see Hudson financial planning members have received (to date) over $27 million in claims settlements.
So the next time someone says insurance companies never pay up perhaps your reply should be that they should call Hudson Financial Planning and speak to the insurance department because our members DO get claims paid.
N.B The insurance department offers a “full claims service” to our members. Let us assist you with the establishment of your potential claim and follow up with the settlement of that claim.
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Insurance plays an important role in any wealth creation and management strategy. There is little point in accumulating wealth if you don’t protect it, or yourself, from unforeseen risks that can undermine the best made plans. Just as your wealth creation strategy needs to be reviewed on a regular basis, so too does your wealth protection plan.
Every stage of life brings with it exciting challenges along with different types of risk. Let’s look at the most common scenarios. You may see yourself in some of these stories.
Young and single, many would believe the best time of a person’s life, before children or mortgage responsibilities arrive. Whilst young people are usually fit and healthy, their age group is most at risk of accidental injury, whether from road accidents or those associated with sporting activities.
At this stage, a young person’s greatest asset is their ability to earn an income, so this is a good time to learn about income protection (IP) insurance. This will replace up to 75% of income in the event of serious illness or injury. It can provide much-needed financial assistance during recovery, as was the case for Sean.
Sean is 24 and works full-time, having completed his carpentry apprenticeship. He enjoys riding motorbikes, playing football, and helping out his parents. Unfortunately, Sean slipped off a ladder while cleaning the gutters of his parents’ house, fracturing his right leg in two places. Fortunately, because his father’s financial planner had advised Sean to insure his income, Sean’s Income Protection (IP) policy paid 75% of his monthly income after only a month off work. This money enabled him to meet his financial commitments while he took another two months off to allow his leg to heal fully. Just as importantly, it allowed Sean to return to his chosen profession as a carpenter.
Young couples are often career-focused and working hard to secure their financial future. This period often sees a greater income, matched by additional expenditure. Home ownership is often a goal, with many buying their own home, or saving for a deposit, whilst others seek to establish financial security before starting a family.
Young couples will face similar risks as young singles, but are more likely to have higher debt obligations. This is when a combination of Life, Total and Permanent Disability (TPD), Trauma and IP cover should be considered to provide financial support in the event of death, disability, illness, or injury. This insurance will pay lump sums that can be used to replace lost income, extinguish debt, and cover medical expenses; as this young couple found out.
Todd and Kate had been together for three years and were busy planning their life together. They had already purchased a home, and a dream wedding was only months away. Their financial planner had recommended the couple take out life insurance when they bought their home. On her way home from the gym one afternoon, Kate’s car was struck by a speeding truck and she was killed instantly. Kate’s policy gave Todd a lump sum that enabled him to pay out their mortgage, relieving him of one less worry at this awful time.
Often families in this life stage have one spouse working full-time, whilst the other may work part-time or not at all to focus on parental responsibilities. At this stage, families often have greater debt levels including a mortgage, and are heavily reliant upon the full-time income. Stress tends to be high during this period of life, so what would happen if the breadwinner were to die suddenly or suffer a debilitating disease that prevented them from working for an extended period of time?
Adequate insurance coverage is essential to be able to replace income, cover medical expenses, extinguish debt, and allow the family to maintain the lifestyle to which it is accustomed. Families with young children may also consider an additional feature of most trauma policies which allows families to include their children. This cover provides a lump sum to help pay for medical expenses and allow parents to have time off work to care for a sick child, as detailed in the following case study.
Matt and Rebecca are 30, have been married for five years and have a two-year-old daughter, Chloe. Matt works full-time as a building surveyor. Rebecca works part-time as a legal secretary, giving her time to spend with Chloe. After Chloe’s birth, Matt and Rebecca’s financial planner suggested they add $200,000 in child trauma cover to Rebecca’s personal trauma policy. Following a prolonged period of sickness and extensive testing, it was revealed that little Chloe was suffering from Non-Hodgkin lymphoma, a type of cancer. Fortunately, because Chloe was covered by Rebecca’s trauma policy, her parents could afford to take extended leave from their work, allowing them to be by Chloe’s side throughout her treatment and recovery. The payout was also a source of funds to pay her medical expenses.
Pre-retirees can also be referred to as ‘empty-nesters’, as their children have generally flown the coop by this time. They are also usually debt-free (or close to it) and have the sole objective of preparing for retirement. While they may be well-placed to achieve their objectives, they are also least likely to be able to afford any adverse changes to their plans.
With age comes a greater risk from a range of events and illnesses including heart attack, stroke or cancer. For this reason it is important that appropriate insurance coverage is maintained to help keep retirement plans on track. A combination of Life, TPD, Trauma and IP can provide protection against these unexpected events, and deliver financial security pre- and post-retirement, as John and Judith discovered.
John and Judith are both 55 and chose to take extended leave from work to start travelling before retiring. Starting from their home town in Brisbane, they planned to take four months to travel by caravan to the tip of Cape York and back. The couple was enjoying a visit to a local winery near Cairns when John had a seizure. He was rushed to hospital with results revealing that he had experienced a stroke, and would suffer permanent mobility impairment, restricting him to a wheelchair. Luckily for John and Judith, they had elected to continue John’s TPD policy until age 65. This policy paid a tax-free lump sum of $500,000 which was more than enough to get them and their caravan back to Brisbane, and make the necessary modifications to their home. There were also funds left over to enable John and Judith to enjoy an early retirement, albeit closer to home.
The key goal of all retirees is to enjoy the fruits of their labour. Whether self-funded or receiving government support payments, the need for insurance has generally diminished as retirees no longer have an income to protect, nor do they usually have a lot of debt. However, not everyone is the same, and insurance reviews at this life stage are just as crucial as any other time.
Many insurance providers recognise that a person’s insurance needs change over time, and include life stage options as part of their policies. These options provide an opportunity to increase sums insured without additional underwriting, and sometimes with limited evidence. Examples of life stage events which can trigger increases on Life & TPD policies include: marriage, the birth or adoption of a child, and taking out or increasing a mortgage.
Whatever your age or stage in life, insurance delivers valuable peace of mind that you and your loved ones are financially protected from misfortune. It’s not a “one size fits all” solution. To ensure your wealth protection is appropriate to your needs, talk to your Hudson Insurance Team.
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