Over years of providing Risk/Insurance advice to professionals, business owners and families, I have noticed that many clients are not aware of the types and levels of insurance they have in place while others assume they have adequate cover when they respond, “yes I have insurance in my super fund”
When considering personal insurance it is important to understand the differences between Group Insurance and Personalised (or Retail) Insurance policies to ensure you and your family are adequately covered in the event of death, disability or other event that prevents you from meeting your financial needs and obligations.
Group Insurance is typically a pooled insurance product offered via a super fund or employer to a group of people. This is the type of default cover you usually see within industry super funds or via an employee super plan. Although insurance premiums (costs) seem to be cheaper for Group Insurance it does not provide as many benefits as Personalised/Retail Insurance.
- Cover is unitised which means the amount insured is likely to decrease with age.
- Cover is limited the amounts insured may not be sufficient to meet the financial needs of clients.
- Renewal is not guaranteed. If you change super funds or stop receiving super contributions(for example, during a career break while raising a family) your insurance may be cancelled and you could end up with no insurance.
- Group insurance terms are agreed with the provider/employer and can change at anytime.
- Group Insurance is rarely medically underwritten upon commencement. This creates uncertainty as a claim may not be paid due to pre-existing medical conditions – despite premiums being paid for years.
Overall, Group Insurance is a “one size fits all” solution compared to Personalised Insurance which can be tailored to your needs.
In our experience, Personalised Insurance provides individuals and their families with comprehensive cover that provides certainty and security. Some of the benefits and features include:
- Larger sums insured – it is important to have insurance that meets your actual needs (such as the repayment of your entire mortgage upon death or disability)
- Policies are fully underwritten upon commencement meaning you are protected even if your health changes unexpectedly over time.
- Renewals are guaranteed so long as premiums are paid and policy terms are grandfathered even if terms change for new policies (for example due to a change in the regulatory environment). We see this being more secure and reliable to you long term.
- Flexible ownership structure allows you to pay for the premium costs in a way that suits your household finances and optimises tax outcomes.
- Protection against a wider range of adverse outcomes. This includes insurances that are not available via super funds. Many clients take out Trauma cover which is not available through super funds but a benefit type we often see paid.
- Longer Cover. This includes later expiry ages and longer income protection benefit periods. This is critical if you need to protect your greatest asset – your ability to earn an income for your entire working career(not just 2 or 5 years).
For some people, depending on their individual situations, Group Insurance may be a suitable option, However it is best to seek professional advice to get the right cover for your individual needs – which should be regularly reviewed by your Financial Adviser should your individual circumstances change.
Please feel free to contact me to review or discuss your own Personal Insurance needs.