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Over the summer break I had an interesting conversation with my aunt, “Tyler, I’ve been meaning to ask you to review our life insurance portfolio. I think we’re doubling up; we’re paying so much in insurance premiums, and we have no idea what we’re covered for, can you help please?’.
Three weeks later, I’ve had the opportunity to review my aunt and uncle’s portfolio. They were paying $30,000 in annual premiums for policies implemented back in 2007. Since our review, we have lodged a claim on their respective trauma policies for a child support benefit event that occurred six years ago, and the insurer has already paid out the $20,000 tax-free lump sum. We have also saved $7,000 in annual premiums by reviewing the appropriateness and competitiveness of their existing policies (which were put in place many years ago) and selecting more appropriate options where relevant.
This example serves as a reminder that the ‘set and forget’ approach to life insurance policies can end up costing you a lot more than necessary.
Being the season of new year’s resolutions and a time when we reassess our physical, mental, and financial well-being, now is the time to review your life insurance policies. Some policies have comprehensive benefits with extras that could see a claim paid on a broken bone, a particular operation, or a diagnosis. If you are paying the premiums, you can claim on the policy. Here are some simple things you can do to get started:
It is a common misconception that the insurance within your superannuation fund is aligned to your personal circumstances. That is not the reality. While Income Protection or Salary Continuance is included as a default in some superannuation funds, unless the sum insured has been updated to reflect your income, there will be a discrepancy between the amount you earn and the benefit you can receive. Therefore, your life insurance sum needs to align with your financial goals for the future.
This could include but is not limited to taking on more debt, having a child, a change in job, a salary increase, or a divorce. A divorce is a key life event that should trigger a review to ensure the beneficiary on the policy is updated.
Trauma insurance is Honan’s most claimed life insurance product. If your only life insurance is within your superannuation fund, you will not have trauma insurance in place.
Trauma insurance pays a tax-free lump sum on medical diagnosis. Approximately 80% of trauma insurance claims are made in response to a cancer diagnosis, a heart attack, or stroke. Unlike income protection where a work test is required, trauma claims are paid based on a medical diagnosis and they are not linked to your ability to work. This can also make it an appropriate cover for non-working spouses.
If you promised yourself 2022 would be your year of change, keep the momentum going and reach out for a review today. We offer a complimentary review of your current life insurance portfolio, including default insurances within your superannuation fund.
Risk Adviser
tyler.scarce@honanlife.com.au
0439 813 124
