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Insurance For Your Greatest Assets

The feeling of buying a new home is almost second to none. You might find yourself caught up in the joy of your newly acquired asset, that is going to be such an important part of your family’s life. These are, indeed, exciting times, but there is also no better time to discuss how to protect your home and lifestyle with appropriate and comprehensive insurance. The sad fact is, that 20% of mortgage defaults are due to “illness or accident in the household”[1]. This does not just happen to “other people” it can easily happen to you, and it is wise to prepare for the worst, so you can enjoy your life with the security of knowing you have a protection plan in place. Most Australians insure their car, but less than 1 in 3 protect their income. A scary statistic when research shows that a significant proportion (38%)[2] of working Australians could survive less than a month without their income before needing to sell assets.

WM ins

 

What are the odds?

Life is fragile and volatile, even when things are at their best. It can be easy to assume that you are one of the lucky ones that will not ever need to draw on income or insurance of any kind. What are the odds, right? The odds are in fact, quite staggering.

  • 1 in 2 Australian men and 1 in 3 Australian women will be diagnosed with cancer by the age of 85.[3]
  • Each year, around 55,000 Australians suffer a heart attack. This equates to one heart attack every 10 minutes.[4]
  • One in four women and one in six men suffer from depression at some time in their life.[5]
  • Around 13,000 new bowel cancer cases are diagnosed in Australia every year. The disease claims almost 4000 lives annually.[6]
  • Stroke is a leading cause of long term disability in adults.7 Close to 20% of all strokes occur to people under age 55[7]. Each year about 12,000 people who have had a stroke suffer another stroke.[8]

So we know that life has its risks, but what can we do to limit them? There are a few different types of personal insurance out there to protect your income and lifestyle when life throws you a curveball. When looking at personal cover, you will need to consider your own situation and risk profile. The type of cover you will need will depend on your debt, your family situation, and what you do for a living. It is crucial that you discuss your options with a good financial planner in order to choose the right cover that will serve you and your family in the right way.

Insurance

There are essentially four main types of personal cover:

Life Insurance (also known as death cover)

Life insurance pays out an amount of money once you pass away or have been diagnosed with a terminal condition. This gives some security to loved ones that rely on you financially, and can even go towards your mortgage, sale of a business, an investment or serve as an ongoing income for dependants. The cost of your cover depends on what level of cover you want to be insured for. You can pay it through your super or just through personal means. When it is time for your life insurance to be paid out, this will go to the beneficiaries that you have nominated. It can also go to a trust or chosen organisation, or a combination of these.

Total Permanent Disability (TPD)

In the event that you become totally and permanently disabled, rendering you likely unable to work in the job that you have qualifications, training or experience for, TPD insurance will pay a lump sum. This can be put towards any debts, medical bills or even go towards supporting your dependants or to fund the sale of a business if you are the owner. You can pay for you TPD insurance cover out of your super or just out of your own pocket.

Income Protection (also known as salary continuance) 

In the event that you get sick or have an accident, income protection will replace your income with a payout (up to 70% of your income up to the age of 65). You can normally claim a tax deduction on the paid premiums, but it is also important to be aware that any amount you receive from a policy can be classified as assessable income. You also need to be aware that there are often waiting periods for receiving your income protection benefit, which could be anything from two weeks to even two years, depending on a range of factors. Usually the cheaper your policy, the longer you need to be patient.

Trauma Insurance (also known as critical illness)

In the case that you experience trauma from something like a stroke, cancer or heart attack, you will receive a payout from your trauma policy (provided you have one). This lump sum may come in handy for medical expenses accrued from your traumatic event, or could even pay off your mortgage and fund some much needed rest and recovery time with your family.

 

With personal insurance in check, it is crucial you consider protecting the roof over your head. There are a few options to look at and, based on your unique situation, decide which cover applies to you:

  • Mortgage insurance is more for the lender than it is for you. It basically lowers the lender’s risk of lending to you, making you more likely to qualify for the loan you are after, that otherwise you may have not been eligible for. It usually works in the way that borrowers who put down a payment of less than 20 percent of the home’s purchase price will be required to pay for mortgage insurance. While it helps you qualify for the loan you want, it does increase the overall cost of your loan, which will just be included in your total monthly repayment or at the close of the loan. It is important to remember who mortgage insurance is for – the lender, hence the name “Lender’s Mortgage Insurance”. In saying this, if you get behind on repayments, you can still lose your good credit history or even your home through foreclosure. Speak to your mortgage broker to work out whether mortgage insurance is something you really need on your next loan, or if it perhaps something you would like to avoid having to pay for.
  • Landlord insuranceIf you are considering leasing out your property, landlord insurance may be what you need to protect you from any event that can put a hole in your pocket. When you’re leasing out a property, you need to essentially prepare for the worst when it comes to what may happen to it. Anything from storm damage, plumbing issues, to tenants not being able to make their rent; all these things can be reconciled with landlord insurance. As a landlord, you will have the choice to purchase landlord insurance, building insurance, contents insurance (if necessary), or combined building and contents insurance. Speak to your mortgage broker to work out if landlord insurance could benefit you in your situation.
  •  Home and contents insurance looks after the cost of replacement or repair to your structure and its contents. Loss or damage can be caused by fires, break-ins, bushfires and storms, as well as accidental breakages. Flood cover might also be available as an option inside your cover. Home and contents insurance also offers liability cover, which looks after you if you find yourself responsible to pay compensation to someone, due to accidentally damaging their property or even injuring them during the insurance period.

 

When it comes to insurance on your life, income, or even your brand-new property, it is really not hard to see the peace of mind that can come, knowing that your loved ones are looked after, and your precious asset and your current lifestyle is secure, no matter what life throws you.

Contact us and we can help you with insuring your assets and protecting your lifestyle with our connections for personal insurance. Give us a call today 02 4038 1623. Tailored advice is vital to ensure you are appropriately insured.

Disclaimer: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product. Licensing Statement: Credit Representative 525053 is authorised under Australian Credit Licence 389328.

[1] Mortgage default in Australia: nature, causes and social and economic Impacts, Australian Housing and Urban Research

Institute, March 2010

[2] Zurich Misinsurance whitepaper February 2014

[3] ‘Facts & Figures – Cancer in Australia 2012’ Cancer Council 2012

[4] ‘Data and Statistics’, Heart Foundation, 2012

[5] The Victorian Government’s Better Health Channel website, ‘Depression – an overview’, 2007

[6] ‘National Bowel Cancer Screening Program monitoring report 2008’, Australian Institute of Health and Welfare 2008

[7] National Stroke Foundation website, ‘What is a Stroke?: Facts, figures and statistics’, 2009

[8] ‘Australia’s Health 2008’, Australian Institute of Health and Welfare 2008

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