How much insurance cover?

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1 How much insurance cover? We consider life and TPD insurance coverage to be family protection it is about protecting your family. Life Insurance The purpose of life insurance is to provide your dependants with a sum of money sufficient to: Pay off your Mortgage $ Pay off your other debts or part thereof $ Provide for your Children s education $ Provide Funds for emergency income $ Provide Funds for medical Costs $ Provided funds for Funeral Costs $ Create a lump sum for ongoing income $ Fund planned expenditure $ Other $ Total $ Less existing cover + Net Assets $ Insurance Cover required $ Some risk advisers will recommend that your life insurance cover should be in the vicinity of 10 times your average annual income, however, the amount required will largely depend on the level of your debts, cost of living (without debt expenditure), and the income the surviving spouse is able to earn. It is worth considering the cost of home support should the home provider suffer premature death. It is worth considering that the ongoing income support be available until your children are at least 18 years old. To establish the capital sum required to provide the level of income (net of income tax), an easy way is to use the Microsoft Excel formula PV where the Rate is the earning rate, net of inflation (for example 0.04 for an expected earning rate of 7.0% ), Nper is the number of years and a negative value of the income required. The Australian Bureau of Statistics revealed that on average, 12 parents of dependent children die each day in Australia. Of these only 4% will have sufficient life insurance to assist their families? This means that 4,200 parents leave their families exposed to financial hardship or even ruin. The average worker does not have much more than $70,000 of life insurance cover via their superannuation a figure that represents 20% of estimated average needs.

2 Additional options available include (additional premium): Waiver of premium This option helps when your Total Disability lasts for more than 90 days or longer. Premiums for the life plan will be waived while the life insured is Totally Disabled under the age of 65. Line of Cover means you wish to take out cover on a key person in your business and allows for the flexibility to increase the sum insured. The maximum benefit available is $2,500,000 Total and Permanent Disablement (TPD) The purpose of TPD insurance is to provide a lump sum if you are either permanently or temporarily incapacitated. Pay off your Mortgage $ Pay off your other debts or part thereof $ Provide for your Children s education $ Provide Funds for emergency income $ Provide Funds for medical Costs $ Create a lump sum for ongoing income $ Fund planned expenditure $ Other $ Total $ Less existing cover + Net Assets $ Insurance Cover required $ You could also consider the lump sum for ongoing income to cover the cost of the potential nursing care that may be required. Total Disability and Totally Disabled mean that, solely because of a Sickness or Injury the Life Insured: is not in any Gainful Occupation, is following the advice of a Medical Practitioner, and is unable to: o perform one or more of the important income producing duties in his or her Own Occupation, or o Perform the important income producing duties of his or her Own Occupation for more than 10 hours per week, or o Generate at least 80% of his or her Monthly Earnings from personal exertion in his or her Own Occupation.

3 Additional options available include (additional premium): TPD Definition Own occupation / Any occupation may be chosen at time of application. Own occupation is not available under the superannuation plan. Death buyback allows Single Benefit TPD Policy Owners to purchase back the level of Life Plan Benefit held prior to the payment of the TPD Benefit, 12 months after the payment of the TPD Benefit. The cover will be issued on the same terms as the original policy, but current premium rates will apply. The Guaranteed Future Insurability Benefit and Line of Cover Option do not apply on the re-purchased cover. Single or double benefit When single benefit is selected any payment under the TPD the value of life cover ends, whereas, a double benefit will not reduce the life plan benefit. However, the Guaranteed future insurability benefit and line of cover option will be cancelled. Death buyback option will allow TPD policy holders to purchase back their life cover held before the TPD benefit that was paid. The maximum benefit available is $2,500,000 Critical Illness Insurance This type of insurance cover is designed to pay a lump sum to the insured on diagnosis of a listed insurable disease or medical condition detailed in the insurance policy. It fills the gap between TPD insurance and income protection insurance. Some of the common medical conditions include: Heart Attack Cancer Blindness Quadriplegia Serious Injury Loss of Limbs Loss of Sight Stroke Deafness Major head trauma Coma Motor Neurone Disease Chronic Liver Disease Hemiplegia Heart valve surgery Major organ transplant Open Heart Surgery Loss of Speech What are the chances of suffering a critical illness? According to an Australian Institute of Health and Welfare and National Stroke Foundation 2004 report, a stroke occurs in Australia every 11 minutes, resulting in 48,000 strokes each year. The Institute, along with the Australasian Association of Cancer Registries, advises in a 2004 report that nearly a third of all men and a quarter of all women will be directly affected by cancer before their 75th birthdays. Example rates of more specific cancers include the diagnosis of 12,000 Australian men each year with prostate cancer (of whom more than 2,700 will die), and, comparably, diagnosis of nearly 12,000 new cases of female breast cancer annually, with a similar 2,600 deaths ( Prostate Cancer Foundation of Australia and National Breast Cancer Foundation, retrieved 14/2/2007.)

4 In the event of a critical illness you could consider: Pay off your Mortgage $ Pay off your other debts or part thereof $ Provide Funds for emergency income $ Provide Funds for medical Costs $ Create a lump sum for ongoing income $ Home and Lifestyle changes $ Other $ Cover required $ (Critical illness insurance cover is the most expensive and was designed to ensure that you do not have a financial problem when you have a medical one) Additional options available include (additional premium): Critical illness buyback an option to repurchase up to 100% of the critical illness benefit 12 months after the payment of a critical illness benefit. This option ensures that you re protected against the future threat of any other critical illness. The maximum benefit available is $1,500,000 Income Protection insurance You are limited to 75% of your income received from personal exertion. Income received from investments is not included. There are a number of options available for an additional cost. In the event that you are unable to work: Earned Income $ Monthly Income $ Benefit available (75% of monthly income) Waiting Period days Benefit Period 2 5 Age 65 years (Age 65 benefit period is not available for all occupations) Agreed Value $ Indemnity

5 Additional options available include (additional premium): Standard or Comprehensive The comprehensive plan includes additional benefits, for example, rehabilitation, overseas assistance, bed confinement, carer s, death, child care and child critical illness benefits. Waiting Period The waiting period refers to the amount of time you must be unable to work before being entitled to receive claim payments. Benefit Period determines how long your income plan benefits will be paid. Retirement protection helps to ensure that your superannuation savings continue to grow whilst you are disabled. Increasing Claims ensures that your benefits keep pace with inflation Accident Benefit a proportionate percentage of your overall sum insured paid for each day you are disabled if you are injured and Totally Disabled for 3 consecutive days during your waiting period (14 and 30 day only) Critical illness A lump sum payment of 6 times the Income Plan sum insured may be provided for a range of conditions. Indemnity / Agreed value o Agreed Value the highest average monthly earnings of the life insured for any 12 consecutive months between the date three years before the policy commencement date and the start of the waiting period. o Indemnity Value the highest average monthly earnings of the life insured for any consecutive 12 months in the 36 months immediately prior to the sickness or injury causing disability. Reductions to the income plan will be made if the life insured: Receives a payment through any other individual or group disability income insurance, credit or mortgage insurance not disclosed at time of underwriting; or Has an occupation class that is not a 1 or 1.5 and receives a payment through workers compensation, common law or statute where such payments are in respect of the disability of the Life Insured and in calculating the payment the relevant authority did not, or could not, take into account payments due under this Plan. The initial maximum benefit - $12,500 Agreed Value & $15,000 Indemnity Value Please note - The information provided has been based upon the Tower Australia Ltd Accelerated protection policy and should not be considered as a substitute for the Product Disclosure Statement.

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