Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
030: Sorting out life insurance
403 Plays5 years ago
Find out how much life insurance cover you need and what to do if you need to get some more.
This episode talks about how to find out how much cover you already have, how to estimate how much cover you need and how to get the best deal on insurance if you need to make some changes.
Mia and Dinah discuss:
- four key types of insurance: Life Insurance, Total & Permanent Disability, Trauma Cover, and Income Protection Insurance
- the importance of knowing how much insurance you have both inside and outside of your superannuation
- the importance of updating your “Binding Nomination” regularly if you hold your Insurance inside your Superannuation policy
- recent changes to legislation which could automatically cancel your insurance within superannuation
- how to estimate how much insurance you need including where to find online calculators
- when you might need to contact a FInancial Advisor for more advice.
- Dinah talks about the benefits of using Paypal for online shopping to speed up the checkout process.
- Mia talks about how she has received letters relating to her superannuation that she doesn’t understand and the challenges in understanding the complex language
- Dinah talks about how she a shared calendar faux pas.
Life Insurance Calculator - Money Smart, Noble Oak
SHAREPlease head to the Life Admin Life Hacks Facebook page to connect with listeners and share your thoughts, questions or suggestions.
Recommended
Transcript
Selling A Car to Carvana
00:00:00
Speaker
Hey babe, what you got there? This is a check from Carvana. I just sold my car to them. I went online and Carvana gave me an offer right away. Then they just picked up the car and gave me this. Well, that's a big check. Well, obviously you could put this towards your next car, or we could finally get that jacuzzi, or I could start taking tuba lessons, or I could quit my job and write my memoir. Or I can put it towards my next car with Carvana. Sorry, your check, not mine. Sell your car to Carvana. Visit Carvana.com or download the app to get a real offer in seconds.
Life Admin Life Hacks Introduction
00:00:30
Speaker
This is Life Admin Life Hacks, a podcast that gives you techniques, tips, and tools to tackle your life admin more efficiently to save you time, your money, and improve your household harmony.
00:00:42
Speaker
I'm Dinero Roberts, an operations manager who at work used to sit next to actuaries and have failed to claim an expert on insurance through osmosis. I'm Mia Northrop, a research and writer and whose eyes glaze over when I hear the words total and permanent disability. This episode will help demystify life insurance and explain how you can find out how much cover you need and what to do if you need to get some more.
Understanding Insurance Coverage
00:01:10
Speaker
Hello and welcome to Life Admin Life Acts. Almost 60% of our survey respondents think they could be wasting money when it comes to insurance. And chances are you might be. And even worse, you may be underinsured, which could leave your loved ones in the lurch if something happens to you.
00:01:27
Speaker
So in this episode, we're going to talk about how to find out how much cover you already have, how to estimate how much cover you need and how to get your best deal on insurance. So when we're talking about life insurance, we're really talking about four different types of cover. There's four different products. There's the life cover, which pays a lump sum when you die. There's total and permanent disability insurance, which pays a lump sum to help with rehabilitation and living costs. There's trauma insurance.
00:01:56
Speaker
which covers you if you're diagnosed with a major illness. And then there's income protection insurance, which pays some of your income if you can't work due to illness or injury. So, you know, this is all happy stuff. This is all happy, happy stuff, but it's important and we're going to talk about it.
00:02:13
Speaker
Now, I think we need to have a bit of a disclaimer here because we can't offer financial advice. We're not licensed financial advisors. So what we're going to discuss today doesn't constitute personal financial advice. And we recommend you consult a financial planner or a trusted professional about how you can get the right life insurance coverage for you and your situation and your budget.
00:02:34
Speaker
But even if you are going to go and see a financial advisor, it's really important to know what you've already got cover for before you go and see them. And this should include insurance you have both within and outside of your superannuation.
Insurance Through Superannuation
00:02:50
Speaker
So more than 70% of Australians have life insurance and they hold it through their superannuation funds. And just about every super fund offers some sort of life or total and permanent disability
00:03:02
Speaker
and or income protection insurance for their members. Yeah, I know with my super, there's always, you know, the paperwork always mentions how much I got it in my balance and then it's tells me how much on the statement and shows me how much I have for these different types of payments. Yeah, so I think the first step to do is to gather your paperwork, but in particular for super to find out what insurance you have within your superannuation. So
00:03:30
Speaker
You should be able to do that either by calling your superannuation fund. You can probably find the same information by accessing your superannuation account online if you've got that all set up and your password saved in your password manager. And it also should be on your annual statement. And there should be a product disclosure statement about what insurance you have. Right. And I guess when you're researching what you already have in place, it's also important to look at your binding nominations.
00:03:58
Speaker
So these are the people that the insurance payout will go to.
00:04:02
Speaker
if you pass away. Yeah, so that's a bit different. So that's really the main difference between insurance you hold within superannuation and insurance that's held outside of superannuation. So if you have insurance within your superannuation, the payout goes to the Superfund trustee, not directly to your estate. And we talked a little bit about that when we talked about wills. So it's really important that to ensure your wishes are followed, that you make a binding nomination
00:04:29
Speaker
with your superannuation fund and lodge it with your fund and keep it updated. So every three years, otherwise it's up to the trustee of the superannuation fund to decide how the money is distributed. And obviously that can get tricky, particularly if you've got complicated family circumstances.
Verifying and Consolidating Super Accounts
00:04:45
Speaker
So say you've logged in and you're online and you're looking at your statements or the details you have, what should you be focusing on?
00:04:53
Speaker
So you're wanting to find out what type of insurance you've got. So have you only got life insurance or have you got life insurance and total and permanent disability and
00:05:03
Speaker
income protection insurance. You're wanting to look how much cover you've got, so what's the amount that would pay out in any of those events. You're wanting to look at the amount of premiums you're paying, because even though I think sometimes people think that they're somehow getting it complementary in their super, but you're always still paying some sort of premium for that cover. Probably the key thing you're wanting to find is the
00:05:27
Speaker
the PDS, the Product Disclosure Statement, because if you can download that, that will help you if you're wanting to compare covers inside and outside insurance. And they're usually presented in a similar way. So it makes it much easier for you to be able to compare. Right. And for a lot of people, they might have multiple superannuation accounts. So if you've changed jobs and you've got super sitting in different places, you might find that you're actually paying premiums on multiple insurance policies.
00:05:56
Speaker
And, you know, there's a lot of good reasons to consolidate, but this is an important one because you might be reducing your retirement savings and you might not be able to claim on multiple policies. There's no point in having multiple policies. Yeah. So some policies allow you to hold more than one, but others say if you've got another policy, you can only claim on that policy. So really important to understand that.
00:06:18
Speaker
So I got a letter recently about the balance of my super fund. I started a new job, but because the balance was at a certain amount, it was going to cancel.
00:06:27
Speaker
some of my insurance and I was like, what is happening? And I actually just made an appointment with the superannuation consultant that comes to my workplace on a regular basis. He can make a booking and sit down with them to go through it all because it's confusing to me. I'm not actually sure what I've signed up for, but some super funds do cancel insurance based on different criteria, don't they?
00:06:50
Speaker
Yeah, and actually there's some legislation in place that actually requires them to cancel the insurance. And so the government put that in place because people with small superannuation balances, particularly who are older, were finding that actually their entire superannuation balance was being taken by insurance that they didn't even know that they had. So there are some laws that say that if your superannuation has been inactive, so that means you haven't contributed to that superannuation for 16 months,
00:07:19
Speaker
that they cancel your insurance, and also if your balance is less than $6,000. So they should send you a letter to let you know that they're gonna cancel the insurance, but if you wanna keep your insurance and you fit into either of those buckets, you need to tell your super fund, or you need to, in the case of where you're not making contributions, make your own personal contributions to the account to keep the insurance active.
00:07:45
Speaker
And this is really important. If you are, you know, are taking paternal, what is it? If you're taking it a rental league or you're, you know, you're doing a stint of contracting or freelancing and you're not making regular contributions to a super fund, you want to make sure that within a six, eight month period, you've made some kind of contribution so that it doesn't get canceled.
00:08:07
Speaker
Yeah, so if you definitely want to keep the insurance going inside your superannuation, then you definitely need to make sure you're focused on that so that you don't accidentally find yourself without insurance.
Determining Life Insurance Needs
00:08:17
Speaker
Okay, so I think for the million dollar questions around this, and they often are million dollar questions, is do I need all four types of insurance? And if I do, how much
00:08:27
Speaker
of each do I need? So this is a really good question and I think this is where that sometimes people can get so overwhelmed because the reality is there's no exactly right answer to this question. So but I think a really good place to start is to think about okay so what would actually happen if I were to die, if I were to become permanently disabled and I couldn't work in either my current profession or in any job
00:08:55
Speaker
or if I was sick for a long period of time, or I had some big expenses relating to an illness. Because you need to really think through what would happen, what short term expenses would there be? So, for example, if you die, there'd be expenses for your funeral. If you disabled, what would happen? How much of a mortgage have I got? How much needs to be repaid? Who would look after my children? Do we need a lump sum to provide an income for my family?
00:09:24
Speaker
or is that not much of a consideration, et cetera, et cetera. And I think that it's a tricky conversation to have, but you really need to sort of almost play out the scenarios because one of the things I think people often don't take into account is, okay, my partner and I have had this conversation. Well, if one of us died, would we keep our current house?
00:09:47
Speaker
It's a big asset, but it's a big home. Would it actually be something you would keep or would you be able to actually sell that when the time was right to release some of the value in that to pay for some of those things?
00:10:02
Speaker
You know, insurance isn't free and it gets more and more expensive as we get older. So as much as you don't want to be underinsured, you also don't want to pay for so much insurance that's more than you ever would need. So I think having that conversation about, you know, what would actually happen in each of those circumstances is really helpful before you start thinking about calculators and formulas and things like that. Yeah.
00:10:29
Speaker
And I know when I've had that conversation with my partner, we did it with a financial planner because they are the ones who are able to talk us through the various scenarios and just provide some objectivity around it so that it didn't just feel like this morbid kind of delving into all of these awful circumstances. And depending on your relationship, you might want to have some high level discussions around how things might play out. But having this conversation with a financial planner
00:10:59
Speaker
is a good way to go. And I guess that brings us to, you know, when should you be having these conversations?
Life Events Prompting Insurance Reviews
00:11:05
Speaker
And there's about five different life events, which most commonly prompt people to think about life insurance or income protection insurance or what it might be. And that is if they are getting married. So, you know, you'll have shared financial obligations.
00:11:19
Speaker
Or indeed, if you're divorced, you might be left with a depleted income. And either way, life insurance is effective if you want to protect your dependents against any uncertainties in the future. Buying a home. So if something happens to you or you or your partner, who would pay the mortgage? Could your family afford to pay the mortgage and pay for funeral expenses, like who's going to take on that debt? Having a child would prompt you to have a think about this, not just in terms of life insurance, but also potentially
00:11:48
Speaker
income protection or trauma insurance, which the breadwinner should have, but also the stay-at-home parent, because if the stay-at-home parent
00:11:57
Speaker
is out of action for a period of time. This might have ramifications in terms of childcare and cleaning and all sorts of other expenses that are incurred. So even if you're not working, you need to think about the kind of cover that would be useful for your family to maintain a certain lifestyle. Then you might get triggered by the fact that something's happened to a close friend or a family member. They've had an emergency or there's been some kind of circumstance which has just given you a wake-up call and you realize, oh,
00:12:25
Speaker
you know this happened to so-and-so that got all these expenses.
00:12:29
Speaker
They can't work. It's a real financial struggle. It's a bit of a nightmare and, you know, it's very stressful. Or you might, unfortunately, be experiencing your own illness or trauma and it's making you face the reality of your financial situation and how you can cover the costs and also maintain the lifestyle for yourself, for your family. And I think that it's important not just to do it when you need to increase your insurance is also thinking about, like, as your children get older and they're no longer dependent on you,
00:12:59
Speaker
making sure that you review it and think about, well, do I still need that cover? And what would really happen now if something happens to me? And think about whether you're actually willing to reduce your cover over time as your obligations reduce.
Review and Adjust Insurance Coverage
00:13:13
Speaker
Okay, so what's the first step? I mean, we talked about going online and looking at your super and having a feel for what you've got now. If you wanna progress and perhaps either change what you're covered with your current super or go outside of your super for cover,
00:13:28
Speaker
What should you do? So I think we've started off talking about thinking about how much you need, but then you actually need to come up with some figures of how much is enough. So I think you can estimate it yourself so you can have a go at thinking about how it would play out. And you can also use some online calculators to estimate your insurance needs. There's a whole bunch of them out there.
00:13:49
Speaker
The simplest one I found was on the Money Smart website, which is a government website. Or there's more comprehensive ones. I found a really good one that's sponsored by an insurer called Noble Oak. You need to make sure when you're doing that, you're always handing out your email address. So you're likely to get sales calls off the back of that. But that can be a really useful exercise, particularly if you haven't gone to see a financial planner to do that estimate.
00:14:16
Speaker
And so what kinds of numbers are you having to put into the calculators? Like your income? Yeah, so you're putting in things like your income, how much you still own on your home, how many dependents you've got, what their education costs are, and what other assets you might be able to call upon. And if you look at the more comprehensive ones, like the Nobel Oak ones, they talk about, you know, what are your living expenses and things like that. So you can really sort of get quite detailed. And that's really what a financial planner would be doing if they went about it. So
00:14:45
Speaker
There's definitely some online tools you can use to try and do that yourselves. And then I guess once you've used those tools and you've had an understanding of what cover you might need, you can go to a comparator site like Canstar where you know what your criteria are and you're just comparing the different offers.
00:15:03
Speaker
Well, I actually think there's probably one more step first, Mia. Once you've figured out what you've got and what you think you should have, this is where you start to think about, okay, if I'm going to go to a financial advisor, it's probably a good time to go to a financial advisor then once you've done a little bit of your own work.
00:15:21
Speaker
But the next step is probably to ring your super fund because you've already got some life insurance through your super fund. As a minimum, you should get a quote from them because most super funds will allow you to increase the amount of cover through them and also potentially add on other covers like income protection insurance. But they can't, super funds aren't allowed to provide trauma cover. So it's often cheaper to get your insurance through superannuation.
00:15:48
Speaker
most they get the benefit of ensuring as a group and you're much less likely to need to have to go and get health checks and things which you often might need, particularly if you want larger amounts of cover and you're wanting to get that outside superannuation. Yes, I know family members who have got life insurance outside of super and you have to go and have a medical and fill in the longest medical questionnaire you've ever seen in your whole life, which can be a little bit onerous.
00:16:15
Speaker
okay good to know i feel like i've got to put a phone call into my financial planner because this area we set up we set up all these insurances several years ago but i've changed super since then and i haven't actually reconciled with the previous super and who knows what's going on
00:16:33
Speaker
Yeah. So I definitely think that super is a really good stop. It's still worth comparing though, because sometimes your superannuation fund might not be the most cost effective place to get your insurance. So as you mentioned, you can then go and have a look at some of those comparative websites like Canstar.
00:16:51
Speaker
you know, try and pick one or two to call or to look at in detail, compare the product disclosure statements. But then it does get really technical and particularly if you're looking at a large amount of life insurance, you might want to go and see a financial advisor because they can give you advice around whether you want.
00:17:08
Speaker
stepped cover or fixed cover and all these quite technical things when it comes to life insurance. So it's worth doing that. But it's also worth understanding a little bit more in your own mind before you go and see a financial advisor about what sort of levels of cover you think you might want. Because financial advisors typically get paid through commission. So as much as they've got an obligation to give you the best advice,
00:17:33
Speaker
They also got that financial incentive to get you the most cover to increase their commission. How did you find your financial planner? I don't have one. I guess because I have had so much experience with the financial world, I feel reasonably comfortable doing my own research. And so we have all of our insurance through superannuation. I did quite a lot of research to figure out which superannuation fund was the best one for us.
00:18:00
Speaker
to have to make sure that we've got the best deal on our insurance. So if you're looking for a financial planner, best to ask family and friends if they can recommend one for you. All of the banks have financial planning services, which are
00:18:15
Speaker
Usually as done a set, the financial planners will be paid via commission structure. They have to be very transparent about how they're paid these days after the Royal Commission into misconduct in this area. So they have to be very clear about whether they're getting paid by commission or whether you pay an upfront fee or there's, you know, percentage fees on how much you've been
Finding a Good Financial Planner
00:18:35
Speaker
insured for.
00:18:35
Speaker
or whatever the payment structure might be. But it is worthwhile talking to family and friends, talking to colleagues and having a chat to a few to also make sure that you have the chemistry with your financial planner, that you feel like they explain things in a clear way, that you're confident in them, that they get what your requirements are and what your needs are.
00:18:56
Speaker
I had a cracker of an experience with a financial planner. She was so dismissive and condescending to my husband and I about some of the financial choices we've made in the past and our plans for the future. It was the most awkward hour of my life. Not a good fit. We went and asked around, got another recommendation from a friend and found someone who's been great and who's been with us for the last few years.
00:19:22
Speaker
So definitely worthwhile making that investment in that relationship and you can go back to them on an annual basis and tweak things or they'll contact you and suggest new things based on what life stage you're at and what life events you're going through.
Evaluating Current Insurance Coverage
00:19:36
Speaker
All right, so hopefully some solid ideas there about how to approach some of these insurances. Go and explore what might be you might currently be covered for and have a think about whether you need alternative cover and whether that should come from within your superannuation account
00:19:52
Speaker
or looking elsewhere. Dona, have you got a life admin high of the week? So I think my life admin high is I've actually just started using PayPal more regularly for online shopping and sorry. PayPal has been around for some time. I know it's been around for some time, but I have never actually used it for online shopping. I had always I'd used it when I'd sold things on eBay to receive the money, but then I'd
00:20:21
Speaker
never actually used it really to buy things. And I just realized how much faster it is. It's still faster than using my password manager where I've got my credit card details saved because it automatically enters your address.
00:20:38
Speaker
So literally by entering your PayPal password in, it just happens. I have no idea why I've never done it before. But as I'm increasingly using online shopping for more and more smaller things, I'm finding it so much more convenient. Great! Better late than never! I don't know, it's been around for like 15 years or something.
00:21:02
Speaker
Oh, well, I guess most people's introduction to PayPal is probably through eBay or something similar. Then, yeah, when you realize you can put in your payment details and your billing address and some places have the one click kind of option. It's good for the... It's amazing. And then a bit of extra sort of protection around it too, in terms of cybersecurity.
00:21:25
Speaker
I think I've talked about it before that I have a couple of Facebook groups of buy, swap and sell, where I've got particular brands that I like and I buy and buy secondhand clothes. So lenient for doing that because then you don't it's a goods don't arrive. You can get a refund through PayPal. Yeah. Yeah. The projection is very good. I think maybe we've just got a life admin low for us this week. Well, yeah. And it's to do with superannuation and insurances. So, you know, I had this consultation with the rep from
00:21:55
Speaker
the super at work and we had a great chat. I thought I was a hundred percent clear on what was happening.
00:22:01
Speaker
I went online afterwards and set some things up as they had suggested. And then I got these letters in the mail and they kind of referred to products that I didn't think I had signed up for. And now I'm confused. And I feel like I might've somehow ended up on a plan that I didn't want to end up on. And I have to go and have another meeting. And I feel quite sheepish about it. It's just inconvenient. Fingers crossed. I did tick the right boxes, but you know,
00:22:31
Speaker
language in some of these letters in terms of describing products and processes, it could be a little clearer. It's just a bit of a hassle. It does sound like a hassle. Do you have a life at Minlo? I do, actually. I'm so good at the shared calendar.
00:22:47
Speaker
And I am probably the main person in our family that enters things into that shared calendar. So soon as school newsletters and things coming out, I'm putting it all in. And we had a date that came out in a school newsletter and I put it into the calendar and realized it was going to be complicated because we all had to be in different places at the same time. So I organized all the logistics of who was going to go where and everything. And then I realized that the date
00:23:12
Speaker
I put the wrong date in the diary. It was actually two weeks later. And so all the logistics I'd organised to make it work, I actually didn't need, and then I had to undo them all. So, a case of being over organised, but... Oh darn, oh well. I hope it was straightforward to unravel it. Yeah, a few text messages and we're all good. That's frustrating.
00:23:37
Speaker
Well, I think that wraps us up for this episode on insurance and life insurance in particular. We hope these hacks will help make life insurance less of a mystery for you. Our top hacks are find out how much cover you have, particularly within your superannuation, and make sure you've got an up to date binding nomination. Think about how much cover you really need based on your circumstances and the assets that you have.
00:24:04
Speaker
and think about consulting a financial planner to assess whether you need more complicated life insurance. If you'd like to join us on our life admin journey, please head to our Facebook page, life admin life hacks to follow us and share your thoughts on what we're doing and feel free to post any comments or certainly post suggestions that we might be able to use. We hope to see you there. Thanks for listening. Show notes for this episode are available at life admin life hacks.com.
00:24:33
Speaker
If you're a fan, please subscribe and share the love and tell a friend or review us in your podcasting app. When you download the Kroger app, you have easy access to savings every day. Shop weekly sales and get personalized coupons to get the most value out of every trip, every time, whether you shop in-store or online. Download the Kroger app now to save big. Kroger, fresh for everyone, must have a digital account to redeem offers. Restrictions may apply, see site for details.
00:25:02
Speaker
Save big on your favorites with the buy five or more, save a dollar each sale. Simply buy five or more participating items and save a dollar each with your card. Kroger. Fresh for everyone.