Increases in Income Protection Rates

As of FY 2012, the industry has suffered over $110 million losses as reported by the Australian Prudential Regulation Authority. Due to this, insurance companies including Comm Insure are compelled to raise premiums for some or their policies.

Only new business rates and 2003-written policies and level premium rates for new business and in-force will remain unaffected by the changes.

 

                             Affected Policies                                               Increase

Lifetime benefits                                                  30%

Age 50-65 benefit periods (IP and

Income Care written pre 1997)                            15%

Income Care policies written between

1997-2003 for Age 49 +                                      7.5%

Legacy income protection for

professional occupations                                    15%  

 

It is important that clients are made aware of the changes that will take effect on 18 May 2013. Starting 2 April, clients will receive letters to inform them. It will include premium rate change, usual CPI and age based indexation.

Certain clients will be affected by the changes including those re-pricing in the next 8-12 weeks. Policies may need to be reviewed with regard to right coverage and affordability as well as possible reduction of lifetime benefit period to age 65.

PSA Testing in Prostate Cancer

Even while the discussions over PSA (prostate specific antigen) testing and its results continue, the facts about prostate cancer remain:

  • More and more men in Australia are found to have prostate cancer.
  • In 2006, prostate cancer was found to be the reason for 30% of tumours.
  • Prostate cancer is said to be the leading cause of cancers in men.

When prostate grows as men age or when cancer is present or there is benign presence like Benign Prostatic Hypertropy, normal and abnormal tissues produce PSA. Its testing has advantages and disadvantages.

Of 100 men with prostate cancer, one may die after undergoing an operation. About 80 of them would experience erectile dysfunctions while about 20% may encounter urinary incontinence.

Advantages:

  • PSA testing can detect early prostate cancer. Even when it shows no symptoms.
  • It can help make treatments more effective especially when cancer is detected early.
  • Treatment side-effects and risks are not as bad as those in advanced cancer stage.

Disadvantages:

  • Because cancer is detected early, the treatments’ effects on life could be negative yet the cancer could be slow-growing and not at once life-threatening.
  • Results of PSA test may be normal yet cancer is present or can be abnormal even without cancer.
  • There is no known proof that with PSA testing, lives were saved or prolonged.

Make sure you get your life insurance organsied before your test.

Increased Benefits for Graduates and New Professionals

Monthly benefits for some individuals and other new professionals are set to increase with an updated offer for cover. The offer has also included Doctor Registrar among those who may qualify for an Agreed Value monthly benefit of up to $10,000. The increased IP (Agreed) monthly benefits affect:

 

  • Doctor GP from $6,250 to $10,000
  • Doctor Intern from $6,250 to $10,000
  • Engineer from $3,750 to $5,000
  • Accountant (Graduate) from $3,750 to $5,000
  • Dentist from $6,250 to $7,500

 

The offer was made to accommodate graduates and new professionals who used to have difficulty taking on higher cover levels due to unmet financial requirements. Moreover, it is now allowed to combine Agreed Value and Indemnity cover up to the Indemnity cover limit.

 

Your financial adviser can provide more information regarding the offer and what existing business rules apply.

Prostate Cancer and Getting the Right Insurance Cover

If you knew that there is life insurance cover product that can help you ease financial burdens that serious illnesses can cause, you are likely to be interested. Yes, there is so don’t wait until it’s too late. Get appropriate insurance protection for you and your loved ones.

Study this scenario:

As an accountant, a father of 3 knew the importance of financial security and he loved sports. Despite not seeing the benefits of taking on life insurance and crisis cover, he heeded his financial planner’s advice and purchased both.

Years later, upon the insistence of his wife, he visited a doctor after observing difficulty in going to the toilet and some discomfort. Tests revealed prostate cancer. Relief was not even the word to describe the comfort he felt knowing he had the right insurance plan. The assurance that his family will be taken care of more than eased the shock and worry over the illness.

The Crisis Recovery policy paid his family $250,000 which made getting better easier for the father and is able to continue with the treatments.

This is the prostate cancer statistics in Australia: yearly, 3,300 men die due to the illness; 1 every 3 hours. Every year, 20,000 new cases are diagnosed or an average of 32 daily.

Ease your family’s financial burden in case you get sick of serious illness. Take out a crisis cover because prostate cancer or other serious illness can happen to anyone. Talk to your Life Insurance adviser about it.

A Look at Partnership & Shareholder Agreements

There are benefits to partnership agreements but in certain situations, how good they will work for partners may be put to the test.

  • A partnership agreement that grants obligations but not rights to a partner who has to move out may find it hard to sell his share if first right of refusal is also stipulated in it. He may offer his share but his partners may refuse to buy him out. Another buyer may not be willing to buy if share is minority.

If the partnership agreement has better exit options, the departing partner may not have to face such a difficult situation.

  • Another case could be of partners who wish to force out another partner who was diagnosed with cancer and goes back to work on part-time basis while in remission. His equity is $1M, trauma cover paid him $500K and he is still entitled to a third of the profit even if his partners have worked extra hours to cover for him from the time of diagnosis.

A well written partnership agreement could have given the partners better options in dealing with the sick partner’s case. It could be one that allows them to compensate the ill partner for his equity after deducting the $500K trauma payment from the full amount due. Which means the sick partner would still have gotten full value after being forced out.

  • A partner may find himself wanting to opt out but can’t force his partners to buy him out because the agreement does not grant that. Without a negotiation, he may not receive his full equity from the business.

In such a case, an agreement that provides better and more appropriate exit options would have been better for the partner who’s opting out.

Need more detail on Life Insurance funding for Partnership Insurance see the following links:

www.query.com.au

www.ccafp.com.au

www.insurancewatch.com.au

 

 

 

Booming Life Insurance Market

More Australians can now enjoy sufficient life cover to maintain their standard of living in the event of their parents’ or partner’s death. This is due to the booming life insurance market, which results in significant underinsurance gap. From $3,073 billion in June 2010, now life underinsurance that is based on current median levels of cover is estimated at $2,166 billion—a reduction of 30%. However, in spite of this progress, the insurance industry still has to evolve more because the median level of life cover is still only 66% of basic needs and 41% of the amount required to ensure that dependents and family members can maintain their standard of living after the death of a parent or spouse.

But aside from the life insurance market, the disability insurance and the income protection markets are also showing some progress. Today, the level of underinsurance for total and permanent disability is $7,912 billion, and for income protection, underinsurance is $589 billion. This significant gap is attributed to the growing population of unmarried individuals, who are in much greater need of financial support in case they won’t be able to work due to sickness or accidental injuries.

This rapid growth of insurance market in Australia has indeed brought many benefits not just to the people of Australia but to the government as well. According to Richard Weatherhead, Principal at Rice Warner, underinsurance comes at a substantial cost to the government. So with this progress, the government is able to save a vast amount, which can be used to fund other projects. But since the people’s needs change from time to time, the insurance industry has to find a more permanent solution to minimize this cost. As of today, the government spends up to $76 million per year for life underinsurance with publically-funded social security benefits filling the gap.

 

 

 

 

Dine Out First Before Life Insurance

In a recent survey by TAL, it appeared that most Australians are more willing to spend on dining out and life insurance is the least of priorities. This is despite the fact that 95% of Australians are with inadequate cover according to the findings of Lifewise/NATSEM.

 The respondents answered that in case of a 10% increase in their wages…

 -          58% of them would put the money on their savings

-          about 38% said they’d pay off their mortgages

-          28% said they would use the extra money for debt reduction such as loans or credit cards.

 The survey was conducted to better understand how consumers view life insurance. Apparently, ‘deleveraging is taking place’ as consumers still prioritize GCF. Only 5% responded with an interest in taking out or upgrading life insurance and only 4% showed willingness to take out different insurance form.

 With people showing willingness to do other things than take out life insurance or upgrade a cover, Jim Minto, TAL’s chief executive said most people may not fulfill obligations  in case of a disability to earn an income. The industry then needs to find ways to make consumers appreciate and value the importance of income protection and its benefits, added Minto.

 

Income Protection Gap Could Mean Home Loss

A nation that is more into savings than into personal income insurance as more than 50% of Australians appeared to be without income protection. This was the result of the 2012 Life Risk Survey done by CommInsure.

According to Retail Advice General Manager Tim Browne, a family is at risk of losing a home should a 3-month gap in income generation happen. He said many people are not so much into securing their future, believing that when they hold insurance within their super funds, all is taken care of – no need to top up, no need to seek advice.

The respondents were asked of the possibilities of $1,500 windfall. This amount represents the average annual insurance premium for a cover of $1 million for a 40-year-old male who does not smoke. 39% said the money would go into their savings and 37% said the money would take care of some bills. Only 2% of the respondents would use it for insurance while a percentage said it would be an opportunity to top up their current cover.

What they’d do in the event of an income gap of 3 months, the survey further revealed the following:

-         39% of the respondents would mortgage or remortgage their homes.

-         32% would opt to downsize their homes.

-         28% may just have to live with relatives or with friends.

There was a weak 34% who said they own income protection but half of that admitted it was inside their super funds. About 20% are willing to top up their cover while 11% did not know whether they have insurance or not.

 

 

Inside or Outside Superannuation – What Makes a Better IP Cover?

When it comes to choosing which income protection is better – inside or outside superannuation -it is best to make an educated choice. But it does not happen easily. An expert’s advice may be needed. Not only does an individual’s needs are to be given consideration but as well as the changes that can occur after 5 to 10 years.

So which income protection is better – inside or outside superannuation? Outside super is ideal for people who are working on a more comfortable retirement years and want to maximize their contributions. It also works well for those who can afford it.

In case of a limited income, cover within super will do well in the same manner that is will serve well for those without ancillary benefits.

Factors differ in and outside super but both come with tax deductibility benefits and taxes are applied on receipts of benefits marginal rates. The costs on both after taxes are the same.

The income of an insured is not affected by a policy within super. Its costs may be taken care of by the 9% of contributions or accumulated balances.

Not each insured finds the cover features within super to their advantage. Concessional contribution cap now at $25,000 is subject to erosion when it includes funds from super contributions.

When choosing IP within super, a trustee has to comply with the Superannuation Industry Supervision Act (1993) requirements. Unlike IP outside super where the insured has to comply only with the terms of the contract, a trustee must meet all requirements to get temporary incapacity benefits.

In the event of payment for non-commutable income in replacement for pre-incapacity income, the benefits are limited.

There are also risks involved regarding ancillary benefits within self-managed super fund. As for granting of benefits for total and permanent disability (TPD) outside super and granting of benefits for IP inside super, considerations are still made.

When granting benefits, only permanent incapacity is covered under TPD and temporary incapacity under IP.

Clients may also question the excess funds that super funds retain in case a certain policy contract value goes higher than pre-disability income. Cushioning such cases is done with the 75 per cent rule (an income protection pre-incapacity income benefits limit).

Where release conditions within super allows up to 100% payment, it may not be the same compensation for IP that is held together with ancillary benefits.

MLC Insurance Offering Changes

MLC Life Insurance has introduced RiskFirst Rapid to its products. This change is along with other changes that came in March and May made by the National Australia Bank-owned insurer in its commitment to:

  • Provide cover for customers as quickly as possible.
  • Meet demands and provide bigger savings on income protection.
  • Process claims payments faster.
  • Provide quality products and better services.

MLC Insurance executive general manager Duncan West said the series of changes is to make sure clients maximize their coverage without sacrificing their coverage level yet save on their insurance premiums. With one insurer, West added that it also allows easier management while being cost-effective.

There is also a 20% income protection premiums savings offered for clients who would opt to bundle cover on Life, Total and Permanent Disability and Critical Illness.

The insurer’s investment platforms include MLC Wrap and MLC Navigator and the recently upgraded MLC Insurance. This means better paid taxes on premiums on member’s super or self-managed super account.