7 steps to financial success

by Steve Nicholas, Financial Adviser

As you move through different phases of your life, it’s important to revisit your financial strategies including your insurances, super strategies, savings and cash flow, debt management and estate planning needs. Doing so could make an enormous difference to your long-term financial situation.

Our 7 steps to financial success  can help you stay on track and achieve your financial and lifestyle goals so you can focus on enjoying life. Continue reading “7 steps to financial success”

How to Protect the Entire Family #1 Consider insuring all family members that can be insured

by Financial Advisers Brett Cribb, Ross Munro, Steve Nicholas and James Marshall

 

In this series of articles on How to Protect the Entire Family, we consider what you can do in three key areas – insurance, super, aged care – to help build and protect the wealth of your family across generations.

Preparing a Will and an Enduring Power of Attorney are standard estate planning considerations for the end of life. However, it is just as important to be financially prepared during life, so that the wealth of the entire family can survive any adversity that may affect a member of the family. Continue reading “How to Protect the Entire Family #1 Consider insuring all family members that can be insured”

What I Wish I’d Known – Financial Advice for My Younger Self #2: How To Pay For Insurance

view/download pdf

By Ross Munro, Financial Adviser

We tend to feel pretty invincible when we’re young. We’re optimistic about the future and not ready to consider the ‘what ifs’: stroke, heart attack, melanomas, chronic illnesses or injury and even death.

I’m lucky not to have experienced any of these, but I’ve known many people ‘just like me’ who have and weren’t prepared. The good news is, there’s a range of insurance policies available to protect our wealth, our business and our families in the event of our death or disability or the loss of a business partner. But one thing I wish I’d known is that there’s a significant benefit in taking out insurance when you’re relatively young. Keep reading for the insurance advice I would give my younger self.

When you purchase life, total and permanent disability (TPD), income protection or trauma insurance, you can choose whether to pay for it in ‘stepped’ premiums or ‘level’ premiums. My advice, in summary, is to consider paying level premiums if you’re under 40. This short video provides a helpful overview.

Most policies are paid for in stepped premiums. These are calculated according to your age and recalculated each year when you renew the policy. You pay for the risk associated with your current age, which means that your premium increases as you age as the likelihood of a claim increases. So the older you get, the more you can expect to pay.

  • A disadvantage of paying stepped premiums is that some people may no longer be able to afford the same level of cover as they age (and potentially have more need for the cover) and the premiums increase.
  • An advantage of paying stepped premiums is that they are generally cheaper at the start of the policy, making it more affordable to hold insurance in the short term.

In contrast, level premiums are calculated according to your age when you open the policy, and usually don’t change (other than to reflect CPI and the insurer’s fee) until you are 65 (at which time they revert to stepped premiums).

  • A disadvantage of paying a level premium is that it usually costs more than a stepped premium in the very short term, although you’ll generally get pay-back after seven to eight years.
  • An advantage of paying a level premium is that you know in advance what your premiums will be and can plan accordingly.

Further considerations

  • If you’re under 40, it’s definitely worth considering level premiums as, by the time you are 65, the total cost of your insurance policy will usually be significantly less than if you had chosen stepped premiums.
  • As a young professional, you are likely to be able to afford the initially higher level premium given that you have fewer financial commitments. And later, as your expenses and financial obligations increase, you will be able to enjoy the fact that your insurance premium won’t.

Get financial advice early

You should discuss the advantages and disadvantages of stepped and level insurance premiums for your particular circumstances with your financial adviser. Seeking the right advice early is key, but do your homework and choose a professional who feels like a good fit.

Here are some tips on how to choose a firm to advise you:

  • Ask for recommendations from your peers.
  • Check out a firm’s and advisers’ credentials and read their client testimonials.
  • Enquire about their specialisations.
  • Contact them by phone or email, and start asking questions.

If you (or a young person in your life) would like to talk to a financial adviser at Stratus Financial Group about cash flow, super, insurance or any other financial matter, please contact us. It will be our pleasure to help. Phone (07) 3007 2007 or email rmunro@stratusfinancialgroup.com.au


Related Articles

What I Wish I’d Known – Financial Advice For My Younger Self Series

  1. Three Golden Rules for Money Management
  2. How To Pay For Insurance
  3. A Most Important Financial Planning Tool
  4. An Effective Super Strategy for Professionals

Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Stratus Financial Group strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.

Taxation outcomes are illustrative only. Always confirm your tax position with a registered tax agent.

Risk Insurance – There’s No Substitute for Professional Advice

By Steve Nicholas, Financial Adviser

While online applications may be convenient and appear cost effective, when it comes to personal risk insurance there is no substitute for advice specific to your circumstances. Unfortunately, it’s usually not until you suffer a personal calamity and need to make a claim that you find that you ticked the wrong box or didn’t adequately disclose information to warrant payment.

When implementing personal risk insurance there is a lot to consider. What level of cover is appropriate so that you are neither under or over insured? How much does it cost and does the policy represent good value for the included benefits? And importantly, is the insurance company reputable and fair when it comes to definitions and paying your full entitlement in the event of a claim?

1. How much is enough?

Deciding the value of a life insurance policy requires careful consideration and usually includes calculating both the current and future financial requirements and circumstances of family members and other dependants. Typically, the claim amount needs to be sufficient to pay for day-to-day living expenses as well as funding for longer term requirements that would likely include:

  • Paying out a mortgage and/or other debts
  • Payment of medical bills and funeral expenses for the deceased
  • Providing lifetime income that supports remaining family members which may include sufficient funding for major expenditures such as education for children
  • Full or partial financial support for a spouse throughout their life including retirement

TIP If, among the insurance premium quotes you receive, there are policies that are either very cheap or very expensive, consider these red flags that require closer examination.


2. Inside your super or not?

Your life insurance can be held inside your superannuation fund. However, there are advantages and disadvantages that need to be considered. On the positive side, your premium will be paid from your superannuation fund so you will not be affected in terms of your day to day cashflow, Naturally, however, these payments will reduce your super balance, which may impact you at retirement time.

Many people opt for ‘group’ insurance through their employer’s superannuation fund. While it is often convenient, premiums can be higher while policy benefits can be less or inappropriate for an individual’s specific circumstances. Often a tailored policy held outside of the super fund is more suitable. It is also important to understand any conditions which may be specific to group cover. These might include cancellation of your policy should your employment circumstances change or reduced entitlements upon making a claim.

TIP Whether your insurance is held in super or not, when changes in your circumstances occur, review your insurance to ensure your cover remains appropriate.


3. The best time to implement insurance is NOW

The earlier you arrange your insurance cover the better, for two key reasons.

The younger you are when you take out your insurance policy, the likelihood of your being in good health means you will avoid higher premiums or exclusions that may apply when you have pre-existing health conditions. Then once you have insurance in place with your insurer, it may be guaranteed renewable regardless of the health matters that may affect you later in life.

The second reason to arrange insurance early concerns cost. Insurance premiums typically increase with the age of the policy holder. Arranging your insurance when you are younger may also mean a ‘level’ premium policy is a more cost effective long term option compared to the more usual ‘stepped’ premium policies. This can have a significant impact over the life of the policy. Advice will help you to determine the most appropriate option for your individual circumstances.

4. Insurance reviews – Why bother?

Personal circumstances change and this can render an insurance policy inappropriate for the new or changed circumstances. For example, beneficiaries will need to be reconsidered if a new family member is born or a spouse is divorced or passes away. Additionally, insurance companies are extremely competitive and this results in new insurance products being offered that may include enhanced benefits and/or premiums that can be less, while offering equivalent, and sometimes, greater value for money.

To implement a well-considered personal risk insurance strategy or to review your existing insurance plan, please contact me for more information. Please call (07) 3007 2007 or email snicholas@stratusfinancialgroup.com.au.


Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Stratus Financial Group strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.

Taxation outcomes are illustrative only. Always confirm your tax position with a registered tax agent.