At Business Insurance Planning, we take the time and trouble to find out what business people and families need and then make appropriate recommendations to meet their specific needs.
Many Life Insurance policies sold in unsolicited mail outs to the public do not provide cover for death from illnesses. They usually only pay out for death by accident, and some include disability lump sums for accidental injuries. The amounts paid out are often quite low and probably would not clear most Australian family's debts.
According to the Suncorp Group*, who paid out almost $43 million during 2007 in Life Cover claims Australia-wide, 84% of these claims were caused by sickness and the remaining 16% were caused by accidents.
Life Insurance provides a lump sum cash benefit to your nominated beneficiaries, or the policy owner if not yourself, or to your Estate - if you die during the period of cover. Life insurance can help provide a stable financial future for your dependents and can provide financial security for your business partners if you die prematurely.
It can help your family cope with major household expenses, such as paying off a mortgage, funding education costs, funeral and medical expenses. If you are the main income earner in the family, an amount of cash to establish an investment fund can be included. The earnings from these investments can provide ongoing income for dependents. See Case Studies for examples.
With business partnerships, including other directors in a Company, your loss to the business may create a financial nightmare for the remaining owners. Your contribution to generating income or goodwill could be lost. Business loans might be called in. The remaining owners could suddenly find themselves with the deceased's spouse as a business partner who may want to get involved in running the business. There are better options. See Case Studies for details.
How much cover do you need? Most of us review our life insurance at key stages during our lives - marriage, purchase of home, birth of children, starting business, etc. Nobody's life protection should remain static over the years. As you progress through life's cycles you usually need more cover when financial commitments are high and children are young, and less later in life if you are more financially secure when your focus may turn to retirement planning.
Business owners can usually have their Life Insurance policy written as a Superannuation Life Insurance policy, which means that the payments can be claimed as Superannuation contributions and deducted from their own or their business's taxable income. Conditions and limitations do apply, and it does not suit everyone. That's why you need to discuss your options with a qualified adviser who can explain the advantages and disadvantages to you.
* These statistics only relate to the insurance business issued by Asteron Life Limited, which is part of the Suncorp Group of Companies.
Total & Permanent Disability
Total and Permanent Disability (TPD) cover is insurance that pays out if the insured person suffers total and permanently disablement from an injury or an illness. There are several different definitions as to what constitutes a TPD claim, depending on whether you have "Own Occupation" or "Any Occupation" or "Home-maker" or "Modified" TPD on your policy. Own Occupation TPD is the best definition but it usually costs more than the other options.
If TPD is included in a Superannuation policy, the conditions for the release of the insurance payment are subject to a superannuation law "Permanent Incapacity" definition, which generally is more difficult to make a claim on.
In the event of a claim, the TPD payment can be used to eliminate debt, pay ongoing medical expenses, make necessary home modifications, or hire home care services such as nursing, cleaning and cooking. It can also provide a "nest egg" to invest for a replacement income if you are unexpectedly forced to retire early and not work again.
TPD is usually purchased as an additional option on a Life or Recovery policy but can also be purchased on a "stand alone" basis. We can advise you on the appropriateness of which TPD cover is suited to your circumstances.
Income Protection insurance is often considered the essential insurance cover for all income earners, because your ability to earn an income determines -
your standard of living,
your ability to build wealth, and
your capacity to provide for your future retirement.
It provides you with an income should you either temporarily or permanently become unable to do your normal work due to an injury or sickness. Benefits are paid to you monthly. The amount of the benefit is usually restricted to 75% of your averaged gross income in the 12 months prior to your disablement, or the benefit can be an Agreed Value.
Premiums are tax deductible for most taxpayers and the income must be declared for tax purposes because it replaces lost "assessable" income.
You are covered for injuries or illnesses that occur anytime, 24 hours a day, 7 days a week, anywhere in the world. Certain high risk activities are excluded from cover.
The choice of cover depends on your individual circumstances. There are "basic" cover policies and "all bells and whistles" policies available. Because of the number of choices and options, advice and discussion with our advisers is paramount before we can recommend a policy appropriate for your purposes.
Benefit Periods (the length of time you can get paid for any one claim) can be up to 2 years, up to 5 years, to age 60 or to age 65. The longer the Benefit Period, the more the policy costs. Claims benefits can be increased annually in line with inflation.
Waiting Periods (the time before a benefit payment is due to be paid) can range from 14 days, 30 days, 60 days or even longer. The longer the Waiting Period, the less the policy costs.
Maximum benefit calculations for self-employed people can be complex, as many of their personal expenses are paid out of their business expenses, which then reduces their declared taxable income.
Your age, sex, smoking status and occupation rating are the factors used to calculate your premium. Some occupations cannot be covered.
Workers Compensation which is paid by employers, by comparison, usually only covers injury claims if they occur while working and only covers illness claims if work-related.
Business Expenses Insurance
Business Expenses Insurance is similar to Income Protection for your business. It enables your business bills to be paid if you are temporarily disabled and unable to work.
If disability forced you to stop working, your personal income may well be mostly covered by an Income Protection benefit, but if the ongoing expenses of the business aren't insured, such as shop or office rent, business loan repayments, vehicle or equipment leasing costs and utilities payments - you might have to use your Income Protection benefits to pay these, to keep the business going until you can return.
Typically Business Expenses Insurance is for a maximum period of 12 months, because if you have been continuously on claim for the whole 12 months, it is likely you'd probably have disposed of your business.
Ideally, a business owner should have his income covered to the maximum allowable by Income Protection, the expenses covered by Business Expenses insurance and any loans covered by Life Insurance and TPD cover.
Trauma insurance pays a lump sum in the event that you suffer a major injury or illness such as heart attack, stroke or cancer. There are more than 30 defined serious medical conditions covered. It is also often called Recovery Insurance or Crisis Care. For some defined less serious conditions you can receive a partial payout out from your Trauma lump sum amount.
To date, the most common condition leading to a claim is malignant cancer. With over 60% of patients surviving more than 5 years for malignant cancer thanks to better treatments available, a Recovery Insurance payment allows the patient to take time off work and pay for their medical treatment, and/or take a long holiday, reduce their debts, change to a less stressful career or even retire early.
Trauma Insurance can be combined with Life and/or TPD cover at a discounted price in a Recovery Package.
Business owners often have a Recovery Package, using the insurance payout to fund the purchase of the interest of a partner or director who has been forced to leave the business through death, total disability or a trauma condition. See Case Studies for details.
The above information is simplified to give a general description of some of the products and options which can make up a Life Insurance Plan. You should seek advice from experienced licensed advisers before deciding to purchase any of these products. Contact us for assistance.