Transferring risk to an insurance company

Most families are carrying significant financial risk should the unexpected happen. The big question you have to ask yourself is:

‘Would your family be able to maintain their lifestyle if you died?’

If your answer to this question is no, you need to consider transferring that financial risk to an insurance company.

Your financial adviser can help you do that, as well as answer any questions you have about life insurance, and then calculate how much life insurance you need to safeguard you and your family in the event something should happen to you or your spouse.

And, if you wish, your adviser will use our sophisticated computer program to ‘broker’ the major insurers to find you the right cover at a competitive price.*

Where should your life insurance be held?

You can hold life insurance in your name, or in your superannuation fund. Both options have pros and cons.

For example, holding life insurance in your name means that the payout may usually be directed to your beneficiaries quickly and with certainty, and free of tax. However, you cannot obtain a tax deduction on the annual premiums you pay.

Conversely, if your life insurance is held in your superannuation fund, you may receive a tax reduction on the annual premiums. In addition, because your superannuation fund pays those premiums, it means you have cover without eating into your family budget. So this option is usually the more affordable for most people.

However, if you died, the trustee of your superannuation fund may delay the payment to your beneficiaries, and may even dispute who should receive the payment (especially if you have not made a valid ‘binding death benefit nomination’). Further, the payment may be taxable at up to 32% if the beneficiary is a non-tax dependant.

How do the insurance companies view you as a risk?

Some insurance companies may charge you significantly less than other companies for the same cover, simply because they see you – or your occupation – as a lower risk. That’s why you should use a financial adviser who has the ability to ‘shop around’ the reputable insurers to get the best
solution for your particular situation.

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