The value of life insurance

Transcription

1 The value of life insurance

2 Most of us think it won t happen to me And if you are very lucky, it might not. But, chances are, many of us will have our lives interrupted by an accident, illness or death. So if you are not one of the lucky ones, wouldn t you prefer to be one of the smart ones with a contingency plan to help you and your family with the difficult times? Over 1,600 people die on Australian roads every year, most aged years 1. One third of women and a quarter of all men will suffer cancer at some stage in their lifetime over half of whom will live for longer than five years after diagnoses 2. Important information CommInsure Protection is an insurance product which is offered through the Colonial Super Retirement Fund ABN (the Fund). Colonial Mutual Superannuation Pty Ltd ABN AFSL is the trustee of the Fund (Trustee) and the issuer of interests in the Fund. The Colonial Mutual Life Assurance Society Limited ABN AFSL (CMLA) is responsible for the administration of the Fund and provides insurance benefits to the Fund as insurer. CMLA and the Trustee are wholly owned non-guaranteed subsidiaries of the Commonwealth Bank of Australia ABN AFSL The information contained in this document has been prepared by CommInsure, a registered business name of CMLA. This document contains factual information and general advice and should not be relied upon as a substitute for seeking advice. It does not take into account your individual objectives, financial situation or needs. You should assess how this information affects you and consider talking to a financial adviser before making an investment decision. The CommInsure Protection PDS is available from your financial adviser, by calling or from Life Care, Trauma Cover, TPD Cover and Child Cover are components of CommInsure Protection. You pay premiums or fees for the products that we provide to you. We do not charge you any additional fees for the products that we provide to you with any general advice. Employees of CommInsure who give you advice do not receive specific payments or commissions for the giving that advice. These employees receive salaries, bonuses and other benefits from us. You may receive advice in relation to the products we offer from financial advisers that do not work for CommInsure. These advisers may receive remuneration from us. Your adviser may be required to set out the remuneration and commissions they receive in their financial services guide or statement of advice. CommInsure can be contacted by phone, our website or you can write to us. The importance of protection Taking out a contingency plan, and maintaining it, enables you and your loved ones to negotiate through life s curveballs. The great thing about having this plan in place is that if you are unable to work, have an accident, or worse that plan can help you or your family by removing some, or all, of the financial burden these events can cause. Protection typically offers four solutions to preserve the way of life you and your family live. 1. Cancer Council: ( Cancer in Australia: an overview, 2008 Australian Institute of Health and Welfare (published December 2008). 2. ABS, Australian Social Trends, Household Debt, cat. No , 2009). 1

3 Here is an overview of some of life s problems, and the solutions protection can provide: Problem Example Protection solution Key benefits Suitable for Die too soon Car crash kills man aged 47 Life cover Can provide a lump sum to pay off your debts and possibly enable your family to maintain their current lifestyle People with loans, such as a mortgage, and or anyone with children Unable to work Builder breaks a leg, and is unable to work for six weeks Income protection Can provide a monthly payment if you are temporarily unable to work due to sickness or injury Anyone who is employed or self employed Unable to work Surgeon loses left arm in a motor cycle accident Total and Permanent Disability cover (TPD) Can provide a lump sum payment if you suffer a total and permanent disability and are unable to work again Anyone who is employed or self employed Suffer a serious illness Hairdresser is diagnosed with cancer Trauma cover Can provide a lump sum payment if you suffer or contract a critical condition specified in the policy Anyone who is employed or self employed Can you afford not to have contingency plan? While we don t like to think about the worst case scenarios if anything did go wrong, could you and your family afford home and car loan repayments, credit card and household bills and the cost of raising children? Additional bills for hospital stays, medication and other medical services can all add up. Not all expenses are covered by Medicare and private health funds. The more debt you have, the more reason for you to maintain adequate cover. One in five families will be impacted by the death of a parent, a serious accident or an illness that renders a parent unable to work 1. The cost of raising children has increased by half from 2007, with average household incomes only growing a quarter in the same period Lifewise NATSEM Underinsurance Report, AMP.NATSEM Income and Wealth Report: Cost of Kids

4 But don t I already have cover? It s true that a large number of people enjoy the benefit of insurance cover through their employer s superannuation fund and employers may offer some as part of your overall package. However, this type of insurance may not be sufficient for you and your family. Workers compensation and Private Health care do provide limited compensation if you are injured at work, or in need of health care. But unfortunately they are restricted and probably won t be enough to maintain your current lifestyle: Workers Compensation is not available to self-employed people It doesn t cover non work related illness More than 50% of all serious accidents happen away from work 1 The maximum Disability Support Pension per week is $383 for singles and $ for couples 2 The average Australian mortgage is approximately $300, The average insured amount in super funds is just $183, Isn t protection expensive? Life insurance premiums, like private health insurance premiums, generally increase as you get older. This is because you are more likely to become sick or pass away. If you do have an accident, become seriously ill or pass away, you and your family could be under a great deal of emotional stress. Life cover can provide you with financial comfort when you need it most. Comparing the costs A daily cup of coffee from a cafe can cost up to $90 a month 5. Most Australians insure their car, so shouldn t you insure yourself? Compare the costs of these expenses with the average cost of protection at just $25 per month. Putting a protection plan in place, to minimise these risks, for you and your family, costs very little. Protection type Average monthly premium Average claims Life cover $ $299,275 9 Income protection $ $29,662 9 Car insurance $ $2,550 Home Buildings and Contents insurance $ $3,400 for Buildings $2,700 for Contents 1. Australian Bureau of Statistics National Health Survey Summary of Results, Australia , December Quoted as at May 2012, by Mortgage & Finance Association of Australia. 4. Rice Warner: Underinsurance in Australia Assumes $3 cup of coffee per day for 30 days. 6. Life Care and Income Care insurance assumes a 35-year old male, living in NSW, non-smoker, degree qualified accountant, annual income $150,000 stepped premiums; Life cover of $500,000, $10,500 monthly Income Protection benefit period to age 65. Monthly premiums don t include $6.30 policy fee and are quoted as at 4 December The CommInsure Car Insurance premium is for a 35 year old male, living in Manly NSW (2095). He drives a 2010 Toyota Corolla automatic hatchback, with Comprehensive car insurance at market value. He has held his licence for more than 10 years with no accidents. Monthly premiums include government fees and charges and are quoted as at 31 July The CommInsure Home Insurance premium is for both Building and Contents cover. He is 35 years old and lives in Manly (2095). The house is freestanding and made of double brick. The sum insured of the building is $350,000 and $75,000 for the contents. Monthly premiums include government fees and charges and are quoted as at 31 July Based on CommInsure average claims for

5 Take up (%) % have motor insurance. 1 In Australia, one car is stolen every eleven minutes % have contents In Australia, someone is burgled approximately every two minutes % have building In Australia each year there are over 10,000 house fires % have life insurance. 1 The risk of being diagnosed with cancer by the age of 75 is one in three for males and one in four for females % have income protection or replacement Of the working population in Australia, one in six men and one in four women are expected to suffer a disability from the age of that causes a loss of six months or more from work % have TPD Four million people in Australia (18.5%) report having a disability % have trauma or recovery Two out of five Australians will suffer a critical illness before they reach Average claim 12 $200,000 $150,000 $100,000 $50,000 0 $0 Monthly Premium Car Contents Cover Building Cover Life Income Total and Permanent Disability (TPD) Trauma $ $ $ $ $ $ $ How can I make protection more affordable? Your adviser will be able to help you structure your protection plan in the most cost effective way. Here are some things you might want to talk about: Use flexi-linking to bundle your protection. Flexi-linking allows you to decide how much you want to pay in cash or from your superannuation balance. This allows you to structure your protection in a way that suits your budget. It uses two linked policies, with only one policy fee. Linked cover is cheaper than stand-alone policies. Overall Flexi linking can improve cash flow and give you more options. Inside super Cash strapped Flexi-linking Cash cautious Outside super Cashed up 100% paid by super 80% paid by super 50% paid by super 20% paid by super 100% paid by client 20% paid by client 50% paid by client 80% paid by client Flexi-linking Flexi-linking Flexi-linking Life, TPD, ICS Trauma Flexi Life, ICS TPD rider, Trauma Flexi Life only TPD, Trauma, IP 1. Roy Morgan Research, March 2012, based on Australian population aged National Motor Vehicle Theft Reduction Council Theft Watch May 2012, based on overall thefts 12 months to March Roy Morgan Research, 12 months to May 2012, Australian population aged Australian Institute of Criminology, April 2009; Unlawful Entry with Intent statistics for Australian Bureau of Statistics: Australian Social trends 2000 Housing Housing Stock: Home and fire safety. 6. AIHW Australia s health Australia s health no. 13. Cat. no. AUS 156. Canberra: AIHW. 7. Institute of Actuaries. Table IAD white collar males and females, December General Cologne Life Re Australia CommInsure Motor Insurance Cover assumes a 35-year-old male driving a 2006 Toyota Corolla Conquest ZZE122R 4D Sedan 4 1.8L 4 SP Automatic. It is housed in Crows Nest, NSW, The car is for private use only, contains no modifications, and the owner has not had any accidents or incidents in the last five years. On the motor vehicle there is no finance, and it is insured for market value. The basic excess for the car is $700. The premium rates include all statutory Government charges and the internet discount. Monthly premiums are quoted as at November The CommInsure Residential Home Package: Owner primary residence assumes a 35-year-old male individual in a free standing double brick house in Crows Nest, NSW, The building sum insured is $350,000, and the contents sum is $75,000, both with excesses of $500. The premium rates include all statutory Government charges and the internet discount. Monthly premiums are quoted as at November Life, Income Care Plus, TPD and Trauma Plus Insurance assumes a 35-year-old male (age 36 next birthday), non-smoker, degree-qualified accountant, annual income $168,000 stepped premiums; Life Cover of $500,000, $10,500 monthly income protection benefit (including $1,260 super continuance), $200,000 TPD (any occupation) and $200,000 Trauma Plus Cover. Monthly premiums are quoted as at April Claims figures are based on the 2012 calendar year. 6 7

6 Pay annually an 8 per cent discount is given for paying upfront. If you can t afford to pay annually, opt for monthly payments. If you have cover with multiple providers, consider consolidating them. Opt for level premiums for cheaper premiums in the long run when you are most likely to claim. For Life Care, Total and Permanent Disability (TPD) cover specifically: Decrease your sum insured to a minimum must-have cover to meet your most important financial commitments. Take out Accidental Death Cover instead of full life cover because some cover is better than none. If you have multiple standalone policies, combine them, for example: Trauma with a TPD Rider is cheaper than separate TPD and Trauma policies. This discount is possible because rider policies have what is known as an offset, meaning that the payment of one benefit (such as TPD) will reduce the other benefit (in this case Trauma) by the amount of the claim paid. If you re self-employed, having life insurance through your super can reduce the effective cost of insurance if you can claim tax deductions for this arrangement. The actual tax deduction arises from the contribution you make to super, which in turn is used to pay for the insurance in your super. This strategy is quite complex, so it s important you speak to your financial adviser for more information. Decline CPI indexation (where your sum insured increases each year to keep pace with inflation). This means if you have stepped premiums, your premium will generally only increase due to getting older. Paying premiums using before-tax dollars via salary sacrifice can deliver significant savings. Check to see if your employer has a salary sacrifice agreement in place where salary sacrifice payments are prospective. Speak to your adviser for more information to make sure your superannuation contributions won t be affected. If you have given up smoking for at least 12 months you may be eligible for non-smoking rates which may reduce your premium amount. If you have been given a premium loading due to your Body Mass Index (BMI) and you have since lost weight and lowered your BMI for at least 12 months you can apply for a reduced loading. 8 9

7 Can I make changes to my policy? Yes. Life tends to involve changes, you could get married, buy a house, raise a family. So as your circumstances change your CommInsure policy can change with you. As these changes happen they may impact the amount of cover you need, and or the way you want to pay for the premiums. Your financial adviser will be able to guide you with the various alternatives you should consider. Keep in mind, reducing cover is easy, whilst reinstating or increasing benefits may require the completion of a new application form and medical underwriting. Four reasons to choose CommInsure 1. We pay claims In 2013, we paid more than $665 million in life and disability insurance claims that s over $12 million per week! CommInsure is a leader in the Australian insurance industry with roots dating back 140 years. Our history has been built on providing competitive products that offer value for money. For some examples of real claims that have been paid recently and for more information and some video testimonials please visit comminsureclaims.com.au 2. We re an award-winning insurer In recent years we ve received a number of awards recognising our excellent products and services, including: Life Insurance Company of the Year awarded by the Australian and New Zealand Institute of Insurance and Finance 2011, 2010 and 2007 Life Company of the Year awarded by Plan for Life & Association of Financial Advisers 2013, 2010, 2009 and 2007 (Finalist 2011 and 2008) Service Quality Award awarded by Plan for Life & Association of Financial Advisers 2010 and 2009 National Contact Centre of the Year awarded by Australian Teleservices Association (ATA) Awards 2012, 2013 Trauma Insurance Award Winner awarded by Plan for Life & Association of Financial Advisers 2009, 2008 and We reward with the Loyalty Bonus Benefit Once you ve held your Life, TPD or Trauma policy with us for five consecutive years or more, we reward your loyalty by giving you an extra 5% of cover at no cost to you. For example, if you had $600,000 worth of cover, after your 5th policy anniversary we d increase this to $630,000 at claim time with no increase in your premium or health evidence needed. 4. We reward your loyalty with the Reward Cover Benefit Once you ve held income protection cover, including Business Overheads Cover, with us for three consecutive years, we reward your loyalty by adding a Reward Cover Benefit at no cost to you and without having to provide any health evidence. The policy then provides an extra $50,000 in Accidental Death Cover, which we ll pay if you die in an accident. This amount will increase by $10,000 each year for the next five years, so you ll eventually have $100,000 of free Accidental Death Cover, for the duration of your policy. If you also have a Life Protection or Total Care Plan policy, we ll double the Reward Cover Benefit to $100,000, increasing by $20,000 each year, to $200,000 after five years. We ll pay this Reward Cover Benefit for Accidental Death if you die within 90 days of the accident and before your cover ends

8 Replacing your insurance policy If you are considering replacing your contingency plan with another insurer, it s important that you are fully informed before you act. Make sure you have thoroughly read the PDS and talked to your financial adviser to ensure your protection needs are fully looked after. Here are some things to consider when you do the policy comparison: Does the new policy have the same or better policy features and benefits? Will you have to undergo new medical checks? Will you be paying new start up fees? Will you be paying increased premiums because you are older than when you purchased your CommInsure policy? Will you be paying increased premiums because your health status may have changed? Will you need to meet new waiting period requirements? Will you have to pay extra premium for benefits that are currently included in your CommInsure policy? Does the insurance company have a strong, market leading reputation? Does the new policy offer the same or better loyalty rewards? Does the insurance company have a strong record of paying claims? Although costs are often a concern, be careful you don t make a decision solely based on costs; it s important to make sure your insurance cover meets all your needs. After reviewing all policies and fully understanding the differences, if you still would like to cancel your CommInsure policy, only cancel once the replacement insurance is in place. This will ensure that you don t have a period of having no cover. Want to apply for, or amend, a policy? Your adviser will be able to help you. Alternatively you can contact CommInsure on am 8 pm (Sydney time). Monday to Friday. commbank.com.au/tailoredlife 12

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