We all have the right to choose to protect the lifestyle of the people that depend upon us. We can insure or leave it to luck.
A prudent person will insure, a small premium can call on the support of a much larger sum insured in the event that “luck” gives way to tragedy.
None of us like to think about the issue of an untimely death, but it does happen with all too often frequency.
The following are actual death claims paid by one of Australia's leading insurers:
Nurse, 29, Myeloid Leukaemia, $166,200
Beauty Therapist, 35, Breast cancer, $105,200
Apprentice mechanic, 19, Car accident, $85,792
Nurse manager, 44, Ovarian cancer, $1,375,448
Chemical engineer, 38, Car accident, $1,024,000
Office clerk, 23, Epilepsy, $200,000
How much cover is enough is the most common question that we are asked. Over the years there have been a number of quick solution rules of thumb as to how much life insurance is enough as a minimum. These range from “3 times your income plus all debts” to “10 times your income”. As a rough guide they are not too bad, but they are pretty rough. The answer is directly linked to your lifestyle and the level of dependency of the people around you.
In a family situation the obvious need for cover arises from the need to clear debt and to provide for the ongoing care of family members and the education of children.
Underinsurance is a major problem in Australia ie: Did you know that in the Black Saturday bushfires in Victoria General insurance companies paid out a staggering $566million in claims yet Life insurance companies only paid out just over $1 million in benefits.
Whatever your position we can help you to determine what is needed and how it can be arranged.
Income Protection
For most people lifestyle depends very much on the ability to earn an income. People are able to insure up to 75% of their income against loss due to accident or illness. Usually the insurance activates after a chosen waiting period, often 30, 60 or 90 days and then pays a monthly income benefit.
Once activated benefits are paid until the insured person returns to work, reaches a preset age, or exceeds the agreed benefit payment period. Benefit payment periods may be for 2 or 5 years or until a selected age such as 65. One insurer offers a lump sum option as an alternative to monthly benefits, this is especially attractive in the situations where there is a real likelihood of long-term benefits being paid and the lump sum allows for more personal investment and income certainty and flexibility.
There are 2 main types of policies commonly offered, one that is based on an Agreed monthly benefit value and the other that Indemnifies the insured up to a contracted amount.
Premiums are normally tax-deductible to the payer and benefit proceeds are treated as taxable income to the recipient.
There are many additional benefits offered by insurers to try to differentiate their product from those of their competitors and our service tries to match a client's circumstances to the best mix of ancillary benefits.
Trauma
This type of risk insurance provides a lump sum to the insured when certain specified medical or traumatic event(s) occur. These conditions are all specified in the policy document and great care needs to be taken in making the selection of policies as all are not the same. The sort of things that are generally covered are strokes, cancers, heart conditions and many others, with individual policies often listing 40 or more specified trigger conditions.
Again some claims payout examples will illustrate the situation:
Medical practitioner, 64, Prostate cancer, $126,822
Trauma insurance takes the financial stress away from what is normally a very stressful time anyway. It can help with the best treatment options being affordable, it can help clear debt, it can help in the rehabilitation process.
We can help you apply for this valuable cover.
Total and Permanent Disability
This form of insurance is most often taken as an additional benefit to a Life insurance policy. It can be proposed as a standalone policy too if desired. TPD is an insurance that pays a benefit if the insured person is totally and permanently disabled and unable to return to work.
Different policies carry differing definitions as to what constitutes a level of disability that makes a person “totally” disabled. Part of the skill of an adviser is to make sure that the definition and the needs of the insured are properly matched.
Some policies also pay a benefit on partial disability.
TPD is paid to the policy owner and is often regarded as a form of insurance that is a personal benefit rather than as a benefit for someone else's care and maintenance.
There are important considerations that need to be addressed when including some TPD policies, especially those that follow the “own occupation” style of definition, in a superannuation plan. We can and do advise clients on these complex matters.
Superannuation and Pensions
Superannuation
i. Accumulation phase super
Active superannuation accounts need careful planning, investment strategies and ongoing monitoring. At OIB we can help with all of those elements. Right from the start our focus is on matching your investor risk profile with the right selection of investments in an account that gives you clear and understandable information, access to that information 24/7 and with the backup of skilled ongoing advice. We can provide superannuation plans for individuals and corporate groups.
We are mindful of the impact of ongoing fees and other charges, we are also mindful of the impact of not having proper advice and getting it wrong.
Over the years we have seen many examples of where people have been invested in the wrong place at the wrong time and have suffered losses. We have also seen people that have not had proper advice that have failed to include adequate Life insurance and TPD cover and have suffered a major medical catastrophe to the ultimate detriment of their dependants.
These are real and costly mistakes that have arisen from not having a qualified adviser to help you along the way.
We can help!
ii. Transition to retirement pensions
Between the age of 55 and retirement age 65 a person is now allowed to draw against their superannuation with considerable savings in income tax and sacrifice all or some of their taxable salary into superannuation with further income tax benefits.
We can help!
In a simplistic way you `bank' the tax you save into superannuation and in this way help to accelerate your accumulation in the latter years of your working life.
You need to seek our advice in this regard as there are many opportunities and some pitfalls in this process. We can prepare an illustration for you after a suitable Fact Find discovery session.
iii. Roll-overs & consolidations
Sometimes prior to retirement many people deem it necessary to bring their superannuation into an environment where they can convert it into an allocated pension.
At this time there are a number of important strategies that can be brought into play to help maximise both the superannuation benefit and often Centrelink benefits after retirement.
This is especially the case when one partner retires a number of years before the other. It may be possible to plan to maximise Centrelink support for the first person to retire by using a number of re-contribution strategies. It is at this time that we would look at the future tax liability at an assumed date of death and try to plan to reduce the potential tax payable by adult beneficiaries.
iv. Investment strategies
Depending on where a person is at in the superannuation cycle there may be a need to reset the strategy to suit the phase. Traditionally we have focused on younger people being aggressive investors, older people being more conservative. This is not always the case; many older clients choose to have aggressive strategies.
But the point is that your needs must be checked from time to time, factors affecting your strategy include your age, health, other sources of income, other dependant or supportive people in your life.
These issues are of extreme importance when a person is about to enter assisted or nursing home care. A long range view is always better than a last minute rush.
Let us help you to make the most of your opportunities and to avoid the traps along the way.
Allocated Pensions
An allocated pension is an account that will provide you with a regular income stream from your super savings. The income stream will generally be available to you once you've reached age 65 and retired from the workforce. In some circumstances, you may be able to access your super while you are still working as a transition to retirement or pre-retirement pension.
While there is a requirement that you receive a minimum pension payment, no maximum pension payment limit applies, except for pre-retirement and term allocated pensions. You can hold a range of assets in your allocated pension account, including shares, managed investments and cash, depending on your investment strategy.
One of the best things about an allocated pension is that it is generally much more tax effective than super.
What are the tax Benefits?
You don’t pay tax on any returns earnt by the investments in your account. These tax free earnings remain in your account to increase the value of your investment, so you can potentially receive more income increasing the life of your pension account.
If you are under 60 but have reached preservation age rolling your super into a pre-retirement allocated pension means you defer the payment of lump sum tax
If you are under 60 payments from your allocated pension account are assessed at ordinary marginal tax rates, but, if you are 55 and 59 or permanently incapacitated you are also entitled to a tax rebate of 15% of the taxable portion of the pension received. Once you turn 60, pension payments and lump sum payments from you pension account are tax free.
Contributions that you or your spouse made into super (on your behalf and for which no tax deduction was claimed) are returned to you tax free over the life of your pension.
Generally, Centrelink treats only part of the income received from an allocated pension as income, so you may still be eligible for social security payments depending on your individual circumstances.
Any unrealised capital gains in your super account may be able to be rolled into your allocated pension account. No tax is payable upon rolling over and, best of all, the investments can later be sold free of capital gains tax.
Doing it Right
Let’s say George aged 65 has just retired and has $350,000 in super. After sitting down with his financial adviser he decides to roll his super into an allocated pension. Under the levels set by legislation, for the first year of the allocated pension George must draw a minimum pension of $17,500 (5%).
Let’s assume that George wants to receive $35,000 as an income from his pension. As George is older than 60 his pension is not taxable and he receives the full $35k as an annual pension tax free.
Getting it Wrong
Jenny is retiring at 59 and has the same super balance as George. However, instead of rolling her super into an allocated pension she withdraws the whole $350k from her super as a lump sum. Assuming that $250k of this amount is a taxable component and that Jenny is entitled to the full tax free threshold of $140k, Jenny will pay tax $18,150 on this withdrawal ($110k x 16.5% including Medicare levy). Any investment acquired by her with amounts withdrawn would then be subject to the ordinary tax rules, rather than being entitled to the tax concessions applicable to pension investments.
Centrelink Benefits
i. Optimising benefits received
There is a very wide range of benefits that support people in all manner of necessitous circumstances. Our focus is more on the benefits that assist people that are a bit short on adequate income for a self sustaining retirement and so we have developed programs that can analyse and project your needs and potential to gain additional benefits from Centrelink.
Sometimes all that is needed is to re-position your assets in order to boost your entitlements.
Again, like the retirement planning phase, this is an area that should be addressed before it is even needed, i.e. check out your situation before you reach benefit age.
ii. Balancing Age Pensions with Allocated Pensions
Under Centrelink rules the amount that a person draws from a Allocated Pension is treated in part as a return of capital and the other part as income. We can calculate this for you. It is an important privilege that is sometimes overlooked by people that do not seek proper professional advice and thus they often fail to apply for a benefit that could have been available.
Let us check out your potential entitlements.
Find My Super
Often times when a person moves from one job to another the last thing on their mind is to remember to transfer superannuation into a personal superannuation plan especially ear-marked as their superannuation accumulation “basket”. It is a smart move but often left for a long time.
Consolidating superannuation into a personal and private plan where you are in charge is an important right that we have in Australia. It can also save you money and helps you to plan to maximise their ongoing potential. We can establish such an account and also search for any lost superannuation that you may have lost contact with, until we find it that is.
If you have lost superannuation, or even just a string of small accounts that need to be brought together we can help.
Investments and Strategies
Master Funds & Wraps
A masterfund or wrap account is a management tool that is commonly used to collect together for convenience, reporting, tax and ease of management by financial advisers. Whilst there is a charge for the use of these facilities there are also cost savings. The use of a masterfund usually allows for an investor to access managed funds on a wholesale basis with consequent cost savings. Management time efficiencies are also considerable and this too contributes to their cost/benefit equation.
OIB use a number of key masterfunds and wrap accounts as part of their service to clients.
Margin Lending
Gearing is simply the process of adding a borrowed amount to your own starting lump sum. The amount borrowed is a fixed commitment that must be repaid. The lender does not share in any profits and does not carry any losses.
Properly, used a Gearing Plan can enhance the returns on investment in a rising market. On the other hand gearing can accelerate losses in a falling market.
One of the features of a geared investment plan is that it will usually generate tax deductions for the interest paid on the borrowed amount.
Usually a lender sets a figure where it reserves the right to recall the loan or demand that the borrower either injects more of his/her cash to the investment or repay some/all of the loan. This is referred to as a Margin Call, it is a call for a return to a position where the lender feels more comfortable with the security given by the borrower.
Plans are available using a starting lump sum, a regular monthly contribution or a bit of both.
Another way to avoid the risk of a margin call is to borrow the loan amount from yourself, that is, redraw it from your mortgage account. The interest should still be deductible if used to produce taxable income.
All of our advisers are qualified to assist you with these types of investment plan.
What is the Art of Saving?
The financial crisis that the world is currently enduring was to a very large extent predicated by excessive use of credit, both at macro and personal levels.
Over the past decade governments, businesses and people in Western Economies spent more than they often earned, financing the gap with more and more credit.
At the personal level household debt in Australia has risen to unsustainable levels.
When the Global Financial Crisis hit new credit lines dried up, in many instances existing credit facilities were cut or called in and spending slowed to a crawl. Governments, such as the Australian Federal Government introduced stimulus packages to try to kick-start more spending and in turn our economy. Anecdotal evidence suggests that much of the stimulus money paid off debt, was set aside for a “rainy day” with the rest being spent.
A second stimulus package is trying to do it all over again.
Picture instead a World where people actually set aside money in advance so they could make purchase in the future - actually saving cash to buy, not using credit cards and incurring debt.
Anyone can become a saver, it is a matter of choice.
We decide to take out a subscription to cable television, it doesn't happen by accident. We decide to spend $10 per week on Tattslotto tickets, it doesn't happen by accident. We decide to continue smoking at what cost only the smoker knows, it is a choice, it doesn't happen by accident.
So too you can decide to become a saver. It is simple, you decide to make savings a fixed cost in your weekly budget just like you do with all of the other things in your lifestyle.
If you regard savings as a cost it becomes a permanent commitment, not the left-overs after everything else is covered. After a while, when your savings have grown you can direct them to realise your target goal or, you can invest them to help make them grow even more.
At Owen Insurance Brokers we have savings programs to help get you started.
Investors with Profiling
i. Assessing your needs
The first step in planning for retirement is a thorough assessment of your personal circumstances, your financial position, goals and interests, and your overall health.
With this information we can start the process of building a strategy to help you to enjoy your retirement years.
It is important to start this process well before the actual date of your retirement, there are many opportunities that can be lost if you wait until after you have actually finished work, especially if you are over age 65.
ii. Portfolio design
A good investment plan starts with a good strategic portfolio design, something that is right for you, does not need to changed too frequently but at the same time something that can be changed if needed. The key issue is that retirement is all about cashflow, not about investment wealth but the two go together. Our job is to help you to get the balance right.
General Insurance
Business Insurance
Insurance is an essential part of running any business. If you are operating a business, chances are that you will need more than just property insurance. Taking out the right insurance will help protect your business and minimise it’s exposure to risk. You’ve worked hard to grow your business, we will work hard to help you protect your investment and livelihood. We specialise in tailored business insurance cover for businesses of a variety of types and sizes.
When you’re busy running a business, insurance is probably the last thing on your mind – and so it should be. Owen Insurance makes getting the business insurance you need fast, simple and affordable so you can get back to looking after your customers with confidence.
Under a Business Insurance Policy, there are different types of cover that provide for the physical loss of or damage to, your property from events including, but not limited to, fire, theft, lightning or explosion. For example, you may want to protect your stock and contents from theft, so you should choose to buy the theft section.
Business Insurance covers available include:
Fire and Defined Events/Accidental Damage
This can cover your Building, Contents and Stock against damage caused by a number of events listed in the policy wording (PDS) which usually includes Fire, Impact Damage and Storm Damage to name a few. Please note that Money and Theft are not usually covered in this section.
Consequential Loss (Business Interruption)
When an event occurs such as a Fire or Storm, and your business is unable to operate - this section can cover your loss of profit, increase in business expenses and/or wages.
Theft
This section covers Stock and Contents (excluding money) for theft from a break-in, which is occasioned by forcible entry.
Glass and Signs
This section covers accidental breakage of glass. This may include a shop window or glass display case or refrigeration cabinet.
Money
This covers your money for theft at the premises, in transit and at your private residence.
Employee Dishonesty
This covers you for any loss of property insured (including money) due to the fraudulent or dishonest conduct of an employee for their own gain or the financial benefit of any other person or organisation.
Goods in Transit
This covers damage to property insured whilst in transit anywhere within the territorial limits caused by a defined event.
Legal Liability
This section provides cover for claims made against you for property damage or physical injury to third parties due to your negligence in the course of operating your business.
Tax Probe/Audit
If the tax department audits you, this section covers the cost of your accountant preparing information requested up to a fixed amount.
Machinery Breakdown (Incl. Deterioration of Stock)
This section covers loss due to fusion of electric motors that are used in your business.
General Property (Portable Property)
You can cover the costs associated with computer breakdown and data re-entry following an insured event.
Computer Equipment
Cover can be gained to cover loss of property whilst it is being transported away from your business premises. This can also include laptops used in the normal course of your business.
Your insurance requirements will vary according to the type of business you are operating.
Let us help. Call today for a no obligation free quote.
Public Liability
Due to an increase in liability lawsuits, it is also becoming more common for businesses and clients to demand proof of Public Liability insurance before entering into contracts.
Public Liability insurance protects you as a sole trader or your company from legal and medical costs that arise from an incident on your property or while working on another’s property, regardless of whether you are at fault.
Your insurance policy needs to cover all legal and medical costs and should also include any potential compensation pay outs including ongoing disability payment costs.
Professional Indemnity
A Professional Indemnity policy indemnifies the insured for amounts which they become legally liable to pay as a result of any actual or alleged negligent act, error or omission in the conduct of their business or profession.
The policy is designed to protect the personal assets of a professional against damages awarded against them. It also covers the costs and expenses of defending claims.
Why you need Professional Indemnity Insurance
General liability policies specifically exclude claims arising for breach of professional duty, particularly where there is a fee paid for such advice or service. They also don’t provide cover where there’s only a financial loss. Pure financial loss liabilities are generally insurable only under a specialist Professional Indemnity insurance policy.
Organisations may be exposed to being sued by third parties for causing a financial loss as a result of their business activities. Whilst not initially apparent, this may include such things as:
Design work
Advice (consultancy)
Technical information (Information Technology)
All potential exposure needs to be carefully reviewed to determine how serious a risk they represent to your organisation, and/or what (if any) protection can be provided under contracts with third parties. Where there is still a significant risk exposure, Professional Indemnity insurance cover should be sought.
We can help.
Construction Insurance
The Construction Industry is the backbone of the economy. Builders and Trades people have special insurance needs and most insurance brokers and companies simply do not understand how difficult life can be for them. Developers require large levels of public liability. Tools can be at risk when left in vehicles or on job sites. To make things more complicated, legislation now requires builders and trades people to take out Builders Warranty Insurance when they enter into a Domestic Contract and the value exceeds $12,000.
At Owen Insurance Brokers we have specific skills in providing insurance that meets the needs of the Construction Industry. Products we provide include:
Contracts all Risk insurance
Builders Warranty / Letters of Eligibility
Workers Compensation
Mobile Plant Insurance / Earthmoving equipment
Public/Products Liability
Trade Packages
Tools of Trade Insurance
Owner/Builder Insurance
Why not call today for a free quote or consultation.
