Australians don’t have enough life insurance

Australians don’t have enough life insurance

According to the Lifewise report, 95% of families do not have adequate levels of insurance.

 

The ‘big picture’ finding from the report was that due to underinsurance by most Australians, if a parent becomes ill or dies, then such an event, and many events like this one will cost the government $1.3 billion in additional social security payments.

 

The study measured the impact of four scenarios on a typical family. A ‘typical’ family involved a couple with two children under five, and the main income-earner worked full-time earning $75,000 and the secondary-income earner worked part-time earning $35,000. They have a mortgage. The report assumes that the male parent has $30,000 in super, $91,000 in life insurance cover, and total and permanent disability insurance of $71,000. The female parent has $14,000 in super.

 

The four scenarios measured in the report were:

  • Husband dies
  • Husband disabled and temporarily unable to work, or permanently unable to work
  • Wife dies
  • Wife disabled and temporarily unable to work, or permanently unable to work.

 

According to the report, the typical family would lose half or more of their income as a result of the death of a parent, or the serious injury or illness of a parent. Other findings from the report included:

  • Based on current average levels of insurance, the typical Australian family’s weekly income will be cut by half to about $600 (after paying for childcare and mortgage) where the main income-earner (husband) becomes temporarily ill or injured and can’t work, or where secondary income-earner (wife) dies or becomes temporarily or permanently disabled
  • The changes to the family’s financial situation will be devastating, and will last at least 10 years.

 

(Trish Power, 21 Feb 2012)

Total & Permanent Disablement Tax Deduction Portions

Changes were recommended to the Income Tax Assessment Amendment Regulations which related to the deductible portion of premiums for TPD insurance, and were passed on 5 October 2011.

 

These changes limit the deductible portion of TPD insurance premiums and give superannuation funds the option of using a simpler method to determine this portion, without having to engage an actuary.

 

Key changes from the draft Regulations include:

1. Clarification that deductibility is not affected if terminal illness is included into the insurance policy;

2. The inclusion of domestic (home) duties definition; and

3. The tightening of the definitions of TPD own occupation and TPD any occupation.

 

Importantly, there were no changes to the specified deductible portions of eligible TPD definitions, as follows:

 

Insurance Policy

Specified Deductible Proportion %

TPD Any Occupation*

100%

TPD Own Occupation*

67%

TPD Own Occupation bundled with Death (Life Cover)*

80%

 

 *(Including with one or more of the following inclusions: ADL, cognitive loss, loss of limbs and domestic (home) duties)

(Article courtesy of AIA Insurance, 19 April 2012)

SMSF Life Insurance Opportunity

Discover how the new SMSF Master Insurance Plan can meet your life insurance needs.

 

Until now, SMSF members seeking life insurance have been restricted to purchasing a retail policy.

 

We now have access using a large insurance company’s products, to offer a specifically tailored insurance arrangement for SMSF members, providing them with access to the benefits of wholesale group insurance.

 

Potential savings for SMSF Members are quite strong, and more benefits can be gained via simplified underwriting and limited medical requirements up to certain limits.

 

Call us now on 1300-78-55-77 and ask more about the SMSF Master Life Insurance Plan.