Life Insurance for a Young Family

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  DemocracyManifest on 03/01/2021 - 12:17

  -2

  It depends on your needs, check the exclusions. Life insurance gets cancelled from your super I think when the balance hits $6000

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  bobbified on 03/01/2021 - 12:19

  +1

  Was told by a friend to get it deducted from my super instead? Is it a good idea?

  Whether it's a good idea or not will depend on your own cashflow. If you prefer to not pay it out of your pocket each month, then super is a good idea. Unlike income protection, life insurance premiums are not tax deductible.

  Look at your superannuation accounts and see if there's currently any insurance attached to it. Most accounts will already have a default amount of insurance. If your account is linked to your employment, it's likely your employer has already negotiated lower-than-retail premium rates (it'll be based on your employer group risk profile, etc). The option to increase the default cover amounts will often be there, however, you may need to provide medical evidence to the insurer before they accept your application. The level of health evidence required will be based on the level of cover you request.

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  aquie5t on 03/01/2021 - 14:48

  +3

  Financial Planner here but this is not financial advice:

  In most cases it is better to have super pay your life insurance. Your super can get a tax deduction for the premiums which you can't personally. You have the added benefit of it not afecting your personal cash flow. Good idea to salary sacrifice or top up your super with a concessional contribution if you are not wanting to impact your retirement savings.

  Regarding the super fund cancelling, they will contact you if there are no contributions into that account before they cancel it.

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  Edsanwong on 03/01/2021 - 15:19

  I used a financial planner to find one for me. Due to quite a few products limited to financial plannners. I am with AIA. I got offered 2 products TAL and AIA

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    joykev on 03/01/2021 - 20:47

    Yes quite interested with TAL and AIA too. May I know why you chose AIA?

    • 

      Edsanwong on 03/01/2021 - 22:39

      +1

      Both are very similar. My fin planner said choose cheaper one.

    • 

      mrtin on 05/01/2021 - 22:48

      Get advice! Then you can be confident the insurance you take out is appropriate to you and your family and is structured the best way possible.

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  Terbo on 04/01/2021 - 12:48

  +3

  1. Ownership - personal is not tax deductible cost, but is tax free and payable to anyone. super owned is tax deductible to super fund, which may or may not pass the TD on to you, tax free payment to spouse and young kids, only payable to them or your estate, 30% tax payable on payments via estate. Note that 'Super owned' is not the same as 'super issued', ie. getting insurance issued from an industry super fund is not the same (or as good) as getting insurance from an insurer, and then having a super fund own and pay for it.
  2. Quality - ensure the policy is medically underwritten and guaranteed renewable ie, they check your health before issuing the policy and cant cancel or change the terms of the policy once you have it. 'Daytime TV' type products sometimes check health at claim and then can deny a claim/only pay for accidents/have large exclusionary terms, are often also more expensive to cover the lack of medical checks/make extra margin/pay for TV ads.
  3. Cost - Any provider that is a middle man for a life insurance company is making an extra margin (health insurer, car association, industry super fund), ideally you try to deal with the insurer directly to get the best price. But most of these insurers dont offer their best products directly so you may need to use a financial adviser. This is also now harder because the current cost to serve for the adviser means they have to charge more than than a small insurance policy costs. eg $2,000 for a $500 pa policy. But if its a once off cost, you are getting a good well priced product with the right ownership, cashflow and tax benefits now and later then may still be worthwhile long term. For that you may also get some super, cashflow, debt and estate planning information/advice which may be worthwhile too.

  EG for Life $1m M35 = Guardian Life $1,392 pa, an Industry Super fund ~$520 pa, a retail insurer, but paid via Super ~$385 pa. So there's $1,000 saving in the first year alone by getting expert financial advice rather than trying to DIY.

  • 

    joykev on 04/01/2021 - 21:54

    @terbo all life insurance I was quoted with had no medical check needed. Should I be concerned?
    I'm healthy and non smoker

    I'm also not sure whether to go with step or level, any idea?

    • 

      mrtin on 05/01/2021 - 22:52

      A financial adviser will answer all your questions and get your the most appropriate cover and structure. If something goes wrong in future, you have some recourse. Ozbargain comment = no recourse.

    • 

      Terbo on 06/01/2021 - 15:13

      Well, $1392 with no Qs instead of <$500 with Qs = if you are in good health then answer the Qs and get a much better rate. FYI for Life insurance, 'most' people will qualify for the standard rate unless major past/present health issues (smoker, heart, cancer, morbidly obese, etc), so the the no questions asked cover is just a rort to get you to pay more money for the same cover for the sake of not completing a ~3 page health form. Always read the fine print/PDS to see if any qualifications/pre existing conditions/wait periods/exclusions exist. A good Life policy will have none if medically underwritten except war/terrorism. As for stepped/level, in a perfect world and if you plan to keep the policy for >15 years then a level policy 'may' be better eventually. But once you are past a certain age the initial price gap is higher/payoff period is longer, Life insurance is actually getting cheaper for age, price rises are modest below age 50 and as you get older you may need less cover (kids gone, debt down, Super up) so paying level rates now for your current higher level of cover with other expenses may not be a 'good' longer term investment if no you dont need that cover in future. And the big risk is that insurers can and are now changing all of the pricing as well so there is no guarantee that your ~12 year break even period now will remain that. Generally, pay less now (stepped), and try to invest the difference into savings, Super or paying down debt so that in 12 years time you can reduce the insurance cover which will reduce the future cost just the same. Bird in the hand.

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  Willco88 on 04/01/2021 - 21:55

  Seen many documentaries of people murdered over life insurance 👹

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    Terbo on 06/01/2021 - 14:59

    I think my wife is tempted at times…