Insurance – Are you covered?
June 27th, 2012 | Financial Planning News, Tax Advice and Updates, Consumer News, Business Advice and Updates
Nothing is more important than your life and your ability to make a living. Insurance is especially important for business owners, operators and self managed super fund members who have gearing in super. If you’re in the start-up stage, or are integral to the day-to-day operations of your business, what will happen to you if you are incapacitated?
The bottom line with insurance is that you work hard, but accidents and unusual events do happen. So don’t ignore insurance and jeopardise the results of your efforts – insurance is a safety net for you, your business and your loved ones.
Which type of insurance is best for you?
Everyone should consider appropriate insurance to suit their individual situation. Insurances available include income protection insurance, business overheads insurance, life insurance and total and permanent disablement (TPD) cover.
Income protection insurance, also known as accident and sickness insurance, can cover up to 75 per cent of your income for an agreed period if you are unable to work because of illness or injury. When choosing income protection insurance, you need to consider the benefit period you require, the level and type of cover (a previously agreed value or a value based on your income in the year before the claim) and the waiting period that will apply before your claim starts being paid.
Business overheads insurance is a business expenses insurance that covers the regular fixed operating expenses of your business if you can’t work due to sickness or injury, for example, rent, principal and interest payments against a business mortgage, utility expenses, printing and stationery. It is specifically designed for self-employed people.
You can purchase business overheads insurance either on its own or as a packaged option with other income protection insurance.
Life and TPD insurance come with a range of options, sometimes under different names. The main types of cover are:
- Life cover – pays a lump sum on your death or terminal illness;
- Critical illness cover – pays a lump sum if you suffer a defined (by the policy) “critical illness event”; and
- Total and permanent disability insurance – pays a lump sump if you are permanently unable to work again due to illness or injury.
What level of cover is best for you?
To work out what level of cover is right for you, you need to take into account any obligations that will need to be met such as mortgage repayments, business debts and school fees. You can use an online calculator to help work out how much cover you will need. There are a number of calculators available online, so take the time to try a few. If you are having problems with calculating your cover, feel free to contact one of our financial planners.
Gearing in a Self Managed Super Fund – why insurance is important
It is now possible to purchase an investment property through a SMSF. It is therefore important that members take out appropriate insurances in the event of sudden death or illness to help cover ongoing maintenance costs. Life insurance, as well as income protection and TPD insurance, can all be held within a SMSF provided they are catered for within the trust deed.
One of the major advantages of holding your insurance within your SMSF is the improvement to your cash flow. Another advantage of this strategy is that life insurance and TPD insurance premiums can be tax deductible. This is because the contributions made to your SMSF can be tax deductible depending on the type of contribution.
Conduct a review of your cover regularly, and whenever your circumstances change. Consult with your financial planner to help navigate through the various insurance options available and tailor the right insurance plan for you and your business.
At The Quinn Group our experienced team of Financial Planners, Accountants and Lawyers can assist you with all your investment strategies and insurance requirements. For more advice about insurance cover that is right for you, contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.