Much has been discussed about private health insurance but has anyone consider life insurance? Not that we are able to benefit once we are dead, but it helps to cover debts, etc for our left behind loved ones.
I know the money could be put somewhere like an investment but I see it much like private health insurance, money that we pay every year but don't get anything out of it unless a claim is needed. Has anyone gotten one or experience claiming a life insurance?
Maybe if you want to pay out of your ar**
generally the insurance through super is cheaper than going directly yourself unless you have a really sh1t super fund.
That's what they'd have you believe, but I find this is rarely the case.
lower premiums usually = poorer definitions (when it will pay out).
I pay ~$3.50/week via super for ~$350k cover. I'm a 31 y.o with a mortgage, wife and baby - it's peanuts.
Yes, it does but the cover is only up to 75 years old. Stand-alone life insurance covers up to 99 years old.
Prince Phillip just snuck his in then
Thank goodness for that. We wouldn't want poor Elizabeth to be destitute.
The word is sneaked Conan.
Prince who ?
I thought he was over by few months.. they wouldn't pay for that for sure..
I was listening to Barefoot Investor book yesterday and he had a good idea…
Increase your superannuation life insurance policy and then contribute that amount extra into your super per week to make up for the cost.
I'm not sure exactly but extra super contribution is taxed at a lower rate, so in essence you pay less for the policy. Yes it might not be till your 99, but it's still something to consider.
Yes, it does but the cover is only up to 75 years old. Stand-alone life insurance covers up to 99 years old.
That may be true, but you need to consider the cost of the policy when you're 99. It's unlikely to be economically viable to retain it after about 55 or 60 if you are of general good health.
One policy I'm aware of will charge a 30 year old male, non-smoker $570 a year for $1m in death cover. At 74 years, that same policy will cost $53,650. Here's some markers for how cost changes with age …
39 years = $800
49 years = $2,080
59 years = $7,750
69 years = $25,120
You can always reduce the payout as years roll on to keep the premium in check. At some point though it becomes useless.
@afoveht: Of course, but to your point it just becomes useless … I could be 74 and still paying $570 a year, all for the princely sum insured of ~$10k!
Is that dependant on the policy owner's age at the time of taking out the policy, or do the premiums increase annually (or on certain age brackets, etc.)?
The above premiums are 'Stepped Premiums'
You also have an option to purchase a policy with Level Premiums.
Premiums will be based on the age you took up the policy.
Level costs more than Stepped but after a few years can be much cheaper.
Although Level finishes at age 65 when it will revert back to Stepped.
I've never known any normal personal require insurance cover beyond age 65. You should be retiring at that age.
@JimB: Yes, this is correct. Level premiums give you a fixed premium based on a fixed sum insured until the age 65 thing kicks in. More expensive upfront, cheaper out the back … can't remember what the "breakeven point" is, but seem to think/remember it's about 8 years or so.
Also agree that most people should not maintain life insurance beyond actually about 55 - 60.
The reality of it … harsh as it may be … is that people are supposed to have put life's major expenses behind them by that stage (particularly home loans, kids' education) and have made large inroads into their retirement funding strategy/requirements. Life insurance is there to provide the safety net up until that point, not to be a big payout "post-retirement".
@Seraphin7: "breakeven point" varies depending the actual person.
But 8 years is a good rule of thumb.
For some older people, I recommend Stepped.. because they may not need life insurance after 6-8 years, so better to pay less now.
For younger people Level all the way.
I don't work in home lending but I'm surprised at how many 55-60yo take up or are approved 30 year loans.
I don't work in home lending but I'm surprised at how many 55-60yo take up or are approved 30 year loans.
Yes, I don't get this at all.
Yet equally we have the so-called "responsible lending" laws that prevent many others from taking up loans they are more than able to service, but because they don't meet the model they get knocked back. The current model basically just looks at whether or not you have the income to make the first mortgage repayment. Whether or not you are likely to be able to make them for 30 years … or the fact you may have assets you intend to liquidate immediately after loan settlement … doesn't seem to get a guernsey.
Hopefully things will free up soon, but it's just been ridiculous, all go the current government can run populist policy.
After age 75, do you really need life insurance to pay out your debts and provide for your loved ones? I'd say life insurance is more for younger people with younger families and higher mortgage debt that would want those costs covered if the died young.
Why do you need life insurance until you're 99?! Your dependents will be independent by then, unless you have a child when you're like 85 or such.
Has anyone gotten one or experience claiming a life insurance
no, they are dead.
Actually, they used to pay out at a certain age, so you got something back. After all, it is specially needed when you are first married and expect to have children, so they have enough to get buy if you suddenly cark, like get hit by a bus or something.but after the kids are gone and house paid off, not needed anymore, so take the money and run, or buy a van and join the grey nomads. Maybe modern Super takes care of this, or maybe you have to specify payout at certain age, but make sure you have it.
These are the old style "insurance bonds" … part insurance, part investment.
Basically you would pay in $x per year and then be able to get a pay out of $y if you die, but if you make it to the required age you would get $z back as an investment return. Some also allow you to cash out along the way with a "redemption value". Not sure if these are still sold, but there's still quite a few policies in force around the place.
AIA still has it, offered through Commbank.
@tks1432: Do these have a "life insurance" policy attached to them, or are they the "10 year" investment bonds?
@Seraphin7: Not too sure, haven't got the chance to look through it properly. https://www.commbank.com.au/investing/investment-growth-bond…
@tks1432: Yeah, these are the investment bonds. They effectively have capital protection features built in, but with that protection being contingent on the life insured dying (rather than other capital protected investment options that are out there).
The older style ones, in very simplistic terms, saw a percentage of your monthly/annual contributions go to funding a life insurance policy (with the commensurate pay out if you die), with the balance funding an investment account. You could pull out at any time and get the current value of the investment account/they would pay out the investment account side once you reach 65 (or whatever it was).
@Seraphin7: old style "insurance bonds" … part insurance, part investment.
Called Whole of Life policies.. terrible insurance/investment product.
@JimB: Yes, whole of life, that was the phrase I was looking for. My recollection is that these were basically a rip on punter for very limited benefit unless you carked it within a couple of years.
Life insurance generally pays the full benefit if you get a terminal illness, so you could get the money before you die.
Should you survive the terminal illness the money is still yours.
It's part of your super.
Don't believe everything you see on daytime television.
Believe it is an option now. Because young people were getting significant amount of their money paid to insurance when they don't have that much assets to begin with.
Yep, look into the "Protect your super" scheme.
It's maybe part of your super. You need to check.
Also, if you do, most people only have default coverage, which is maybe only $250k or something.
Also, super policies are group polices so they generally have more exclusions and cut out earlier. A lot of super polices expire at 65, whereas retail polices might expire at 99.
Mine is $5.45 a week for $375,000. I just checked.
Not sure if it's comparable to others. I may look into it further…or I might not.
I don't have any dependants so I increased the Total Permanent Disability insurance and decided to forgo the life insurance of my super scheme.
retail policies might expire at 99, but they are generally unaffordable past 60 and if you can afford it you don't the policy.
While it might become unaffordable, you still have the option to continue it if you want. A super policy will just stop at 65.
@jorf: I have the option of buying a Ferrari too. The reality is if I can afford it at that age I probably don't need it.
@gromit: The point is moreso that the policy -can- continue after 65. At least you have that choice. If for example you have some bad health issues at 64, maybe you'd consider continuing to pay an increased premium at that time to cover you in a more likely event of a payout.
With a super policy that cuts out at 65, you don't have that choice.
Also, affordability is relative. They can't cut the payout figure, but they can increase the premiums. If I had a $1M policy, even if it cost $1000/month after age 65 (and that's probably not far off the mark for a sub-70 year old), the payout at any point beyond my life would exceed my premium input (granted it's going to keep increasing, so that's probably only true for 5-10 years in reality).
Keeping the policy for a full 99 years is questionable, but maybe your life circumstances would make an additional 5-10 years a reasonable proposition.
Don't believe everything you see on daytime television
Cha Cha Cha choosie
It may be part of your super. It's not in everyone's.
It's part of your super.
No. It should never have been like that. An option, sure, but opt-out is totally totally immoral and wrong.
Nobody took out superannuation thinking "this retirement fund should also deduct insurance premiums I never asked for". And why? Well two reasons:
The only reason that anybody in Australia gets the two mixed up is because superannuation companies forced members into it and now they're used to it. Doesn't make it right.
Agreed. The genesis of this problem is that superannuation was born of the life insurance industry. Here we are the best part of 30 years into compulsory super and we still haven't ironed it out.
life insurance is used to protect your families from debt. You don't expect to use it, but its there as a safety net.
I'm covered with Superannuation provider. the premiums are often cheaper as the super fund buys insurance policies in bulk.
However the coverage is a bit limited— for e.g nowadays you don't get Trauma insurance, which you would normally only get if you get Life insurance outside of super.
In my experience, insurance with super is not necessarily cheaper - i am with one of the largest industry fund and when i moved insurance outside super it was cheaper. Then we did the same for my partner and it was cheaper as well. Not sure why but thats the case !
Part of the reason is automatic cover and everyone in the fund gets the same rates.
That's fantastic if you're unhealthy and a smoker- you pay the same rates as someone is is healthy and non-smoker.
When you apply directly with the insurance company, they will assess you based on your health and lifestyle (including smoker status), therefore you may get a cheaper rate.
We tell people who can't get insurance elsewhere to join up an industry superfund.. they'll get cover there.
Thanks that explains it well
Agree with this completely. Anyone who has life insurance tagged in with their super needs to take a good look at it. Easy enough to do by checking retailers for the cost of the equivalent cover.
And don’t believe all that nonsense about “if your life cover is kept inside your super it has tax benefits”. Utter BS. My life cover is retail, but I use roll over option to pay the premiums directly from my super fund.
I saved a fortune by going retail
Insurance in Super is pretax (technically taxed at 15%) whereas Retail Insurance is post tax, unless the retail is 30% cheaper for me Super option is no brainer. I do have Income Protection outside of super though as I can claim that as deduction, so no different to Super.
I didn't realise until I saw a financial advisor that there's a fairly specific way (or several ways) to calculate how much life insurance is worthwhile, so you get enough that your family isn't kicked out of home due to mortgage non-repayments & have enough to cover living expenses, yet not buying too much insurance & wasting money on premiums.
This isn't like private health insurance at all. This is like fire insurance. You have it & hope you never have to claim it.
Correct. People should buy enough to cover a significant portion of debt (assuming spouse can work) on family home plus money needed in the interim while assets are realised.
Not just debt: maintenance for kids' schooling, etc.
Single income families should also consider getting a policy on the home-maker no less than on the income earner. Just because they don't earn taxable dollars doesn't mean their contribution is not very valuable - replacing them with paid care so that you can continue life with minimal interruption (carers, cleaners, etc.) could be very expensive.
Depends. You don't want your policy make you worth more dead than alive.
@netjock: Depends on your circumstances - how many dependants and how long you need to maintain them. Kids going to private school; wife wants a new house in a flash suburb; cops need paying off to remain quiet; mistresses need looking after; brothers' boxing gym not really making any money apart from what you're putting through to clean - all good reasons for a big policy.
Thinking about getting it when I'm a bit older, probably around 50. My dad passed away when he was 53 so I always have that in the back of my mind and want to leave my wife and kids with enough money.
That was my consideration too. But there's a risk of not being covered because of some medical conditions as you get older….or possibly die before buying it.
Isn't life insure something you need, when you are young with young kids, than when you are in 50's.
By the time you are in your 50's, usually your house is paid off or at least have some capital or investments ? and kids are grown up?
Surely it is Life Assurance, not insurance.
Tomatoes tomaytoes.
One is certain to happen, one is a maybe.
I had a friend who passed away unexpectedly and at a relatively young age. No husband or kids so next of kin was her parents. She never opted out of their super insurance and they were able to get a payout from the super company.
You should all consider yourself already with life insurance from your super. Obviously you can opt out but the people who aren't aware are paying for it. In my example their ignorance helped their family after their loss.
I would suggest this would be one of the few scenarios (assuming she also had no debt) where life insurance is likely unnecessary and only a drain on a super balance.
Life insurance should be there to cover a need (clear debt, provide replacement income for immediate family left behind). How did it 'help' her parents after the loss?
On the surface it would be funeral costs.
But to be honest I don't know and it's none of my business to ask such an intimate question.
Sorry for your loss
You could always get together with some pals and form a tontine.
How would getting pillow with your friends help?
So just one person gets to finally enjoy it in their 80s for a few years before they die?
If you buy insurance for your house or car, ask yourself…. why did you buy it in the first place.
Life insurance is similar. You hope to never claim, but its there just in case for a rainy day.
Life insurance is pretty clear cut. There's also other insurances you might want to investigate including, disability/TPD, income/salary continuance and trauma/critical illness. That in itself opens a can of worms as its pretty complex and complicated in terms of payout definitions, ownership structure and premium payments.
"…for a rainy day." You mean, for when you die?
That is why it is usually called Life Assurance.
People focusing here on Death cover, but Life Insurance as a category incorporates TPD, Trauma and Income Protection.
Arguable TPD and IP are the most important. If you have an accident, your cost of living can go through the roof with medical and modification costs, while you income can go to zero. Most people on spinal ward didn't expect to be there, and many never considered insurance, which leaves them entirely at the mercy of public health system and family donations (or asking for crowd funding, which is a whole other topic). Money is the last thing you want to be worried about in this scenario. NDIS is good, but you don't want to be 100% reliant on it, as its a government bureaucracy with various issues.
Cover through super (known as group cover) is at a wholesale rate and paid for with tax advantaged salary deductions, so is often the best way to go for most people. Trauma cannot be included in super so is either seperate or often not taken out as it can be expensive, and IP will usually do the job instead of Trauma (generally speaking).
Death cover is important too, but in the context of providing for family members left behind. Children's education, child care mortgage etc, etc. Death of a bread winner, can leave a family in a difficult situation - again with higher costs of living (child care etc) with less income.
Its prudent to have cover (where required), ignoring it or rolling the dice is not prudent, its just a risk, like driving a car uninsured.
Thank you, very informative
I'm a fan of death cover but it is far more expensive in Australia than in other countries for no particularly explicable reason.
The stupid Aussie Tax
No, stupid Flanders!
As part of my job I sell life insurance but I'm not here to sell you anything.
I can tell you insurance works. I've seen it save the wife having to sell the family home because she doesn't have the means to repay the mortgage.
Not cheap these days as claims are going through the roof.
One benefit of having a insurance separate from your superannuation fund is Level Premiums. Once the policy is in place Level premium policies will not go up due to your age.
This separate insurance policy's premiums can be funded by your superfund- and get the benefit of level premiums.
Trauma is also a great cover to have as well.
If you or your family rely on your income to fund your/their lifestyle and/or mortgage repayments on the family home, then you need insurance.
Just curious, as an insurance seller, do you get one for yourself? If yes, which one did you buy?
Term (Life) $1m, TPD $500k, Trauma $500k.
I didn't get IP because of the way my income is structured so I got a bit more Trauma than usual.
What's the benefit of having joint policies? I came across the statement below and I thought why bother as it works the same:
Under a joint life policy, if the cover ends for one Life Insured, the cover for the other Life Insured continues unaffected. Your joint life policy can be split into two single life policies if requested.
@tks1432: I'd say so you save on policy fees and the premium may be cheaper than 2 separate policies.
It's all contextual.
If you're a single person without dependants then life insurance is pretty worthless… why would you care if your money goes to someone you're probably not that close to?
If you have a family and kids then it may be more pertinent for sure.
I’m young, no house, no kids, no debt (except for hecs) so no.
Name checks out
If you are willing to comprehensively insure your car in the event you have an accident, why wouldn't you insure yourself for any unexpected life events that may pop up…
… is what I wish I had told myself prior to my cancer diagnosis at age 35 and 3 weeks into becoming a father.
Listen to some Australian podcasts around family and finance and you will see the general consensus is that it is important to consider. Here is a good one to get started (not affiliated) Part1: https://player.whooshkaa.com/episode?id=813669 Part2: https://player.whooshkaa.com/episode?id=814031
It can be an expensive thing to pay each month, however it is there to cover you in the event you need it (like all insurances).
I have looked into this a lot recently and have found the 2 most important insurances are Death and Income Protection. Trauma is a luxury but worth it if you can afford it.
If you are looking to get an insurance product, it is recommended to do it now as there is apparently a change to insurance coming later this year around October from memory. The reason for this is all the insurance companies have been losing a bunch of money over this COVID period due to poorly written contracts.
You pay less for the insurances through your super but you are not able to scale or tailor it to meet your requirements. Also be warned that since the royal commission, if your super balance drops below a certain amount your insurance can be cancelled without your authority.
Seek out independent advice on insurance from a professional rather than on here. But in my view, if you have people that depend on you to have an income then you should be looking at it more seriously and earlier on than I did.
Yes if you have kids then your income or lack of income can change their lives. It can mean university or not later on for them, or medical therapies or not if they acquire a brain injury, a lawyer or not if someone influential in the government rapes them. Life throws some crazy curveballs and your parents/family having a lot of money or not changes things.
a lawyer or not if someone influential in the government rapes them.
This is a head-scratcher for our international readers
No, it's just a head scratcher.. wtf
We have paid so many claims to clients who develop cancer.
They have all be so grateful to have taken out a policy.
Seeing how they were able to survive financially made me decide to take out proper cover.
I hope you're doing well.
F#%k cancer.
The only reason my Dad still has an income after getting prostate cancer is because he had a great life insurance policy. Got a payout and they're still paying his working wage, increases 3% every year to adjust for CPI. The idea was to get him back to work but no one will hire an almost 60 year old who has been out of work for quite a few years and has had cancer. Even Bunnings didn't want him (and he was well over qualified for that). He's in remission now thankfully.
One of his best mates was the insurance broker and he himself was also diagnosed with cancer. He also got a large payout and his salary is being paid to him while he can't work. Now he's able to concentrate on treatments and trying to get better without having to stress where money is coming from.
From these experiences I'd say it's 100% worth it, especially if you have any family history of cancer or other genetic diseases. You'll pay more for it but it's totally worth it if you ever need it.
I could be wrong, but I believe the life/death/term insurance covers terminal illness as well.
From insurance companies point of view, IPs are the loss-making product. They make money from life and TPD. So, does it mean, IP is more worth having from end customer point of view?
Does your superannuation provider not help with similar insurance?