Several months ago, I wrote a blog on the Four Corners episode which brought to light the real need to obtain financial advice when selecting an insurance policy. Just recently, I came across this article in the Sydney Morning Herald which further provides evidence on why you should seek advice. The article titled “Insurer tells family saving daughter’s life is ‘elective surgery’” is worth a read as it touches on the fine print that is often very easily missed but has a big impact on your family’s life should something unexpected arise.
Hold it in your name
I find that, in my profession, a majority of clients hold income protection within their super. As an advisor who is an advocate for life insurance, and in particular income protection, my preference is to always hold an income protection policy in your personal name. There are many reasons for this:
– Premiums are tax deductible
– You are able to access many more features than if you were with 100% super owned policies. This is mainly due to legislation rather than product offerings.
– The policy is portable. This is opposed to holding it in super where you may be required to retain the super fund for the remainder of your working life if you cannot replace the policy.
Make a well-informed decision
Though my preference is to hold the policies personally, I am certainly aware that some people, due to budget constraints, are unable to fund the premiums. This is where you need to consider the pros and cons of super vs non super and weigh up the options that best fit your circumstances. At least then you have the opportunity to make an educated decision.
Changes in Legislation
It should be noted though that since a change in legislation a few years ago, to what policies can be held inside super, we have seen more sophisticated and diverse policies available. While this prevents scenarios such as the Anderson elective surgery dilemma from happening again, not everyone offers these policies. For example, any industry fund does not offer such a policy!
This is just a summarized glance but as you can see life insurance can be a very complex world. This is why it is recommended you obtain professional advice.