Recent Forbes magazine article lists five major ways in which owners of Life Insurance policies have been caught out and some simple ways in which we can avoid these pitfalls. The examples given in the article are mostly taken from the United States however, the principles hold similar here in Australia. Be sure to look out for the following:
Rate Increases – Once you implement a Life policy it would be imprudent to just stow it away in the drawer and forget about it. Have your adviser update you annually as premiums increase so that you are in control.
Group Insurance – While sometimes Group Cover can be more effectively priced, on many occasions it can be quite the opposite. Get yourself a comparison. Furthermore, be aware of the conditions. An employer implemented policy could prove to be null and void once employment has ceased, leaving you uncovered and your financial security vulnerable.
Beneficiary Designations – Make certain your beneficiary nominations are up to date as your situation changes. Events such as marriage, the birth of children, or even divorce should prompt you to make the right amendments to your policy.
Estate Tax – Countless options arise on ways of minimising tax for your estate upon payments of Life Insurance policies. Speak to your adviser on strategies to ensure tax efficiency.
Ownership Structure – Do you own your own business? Are you a sole trader? If the answer is yes, take advantage of the many tax efficiencies available to you. Find out the best way to own your policy whether that be through Individual ownership, Business ownbership, or Superannuation ownership. Speak to a risk adviser for the option most catered to your situation.
Implementing a Life Insurance Policy is a powerful step towards securing the financial future of your loved ones, but maintaining them is just as important. Another reason to have a risk adviser keep you up to date at least on an annual basis.