Insurance costs (life, TPD, income protection)

[Harriet]

Hello everyone,

I am not sure if this is the right section for this post, but here goes.

My husband and I are in the process of setting up a self managed super fund.

As part of this process, we've been getting quotes - via a financial advisor - for insurances. Specifically, life, TPD and income protection.

Given we didn't have any of these insurances in the past, we are reeling a bit from the quotes. I am beginning to wonder if the prices are fair/reasonable.

For those who are willing to share, do you mind me asking what premiums you pay for your insurances? I do realise everyone's situation is different, but at the same time, my husband and I wouldn't be too out of the odinary - both in our late forties, non smokers, good health, both earn about $80K.

Thanks.

H.

 

[sandyfeet]

We have recently had a quote done by CBA (only because our loans are with them) just to get a general idea of costs involved and to learn a bit more about it. We are about to start a family so we figure we need something but really at a loss at the moment as to what extent we should insure ourselves.

To cover us for a total care plan (income protection, TPD, life care) based on incomes around 100k each and debt >700k, we were quoted about $4300, (this allowed a tasty commission of $433 pa!!!!!!)

We are only just staring to look into this so can't comment any further, but we certainly don't feel we need ALL of the quoted cover,

 

[Peter_Tersteeg]

The cost of these types of insurance increases significantly as you get older. It can also be dependant on various occupations, lifestyles, etc.

My own insurance (covering just about everything) cost around $6k. The premium for my life insurance is higher than usual because I enjoy some dangerous sports.

I also got 'level cover' which costs a bit more initially but doesn't increase with age.

 

[Harriet]

We have recently had a quote done by CBA (only because our loans are with them) just to get a general idea of costs involved and to learn a bit more about it. We are about to start a family so we figure we need something but really at a loss at the moment as to what extent we should insure ourselves.

To cover us for a total care plan (income protection, TPD, life care) based on incomes around 100k each and debt >700k, we were quoted about $4300, (this allowed a tasty commission of $433 pa!!!!!!)

We are only just staring to look into this so can't comment any further, but we certainly don't feel we need ALL of the quoted cover,

Thanks for that.

Is that the total for both of you, or each?

Quite a bit cheaper than ours. We are looking at $6700 (total). Ours would be owned by our super fund, and tax deductible. But still . . . that's a big chunk.

 

[Harriet]

The cost of these types of insurance increases significantly as you get older. It can also be dependant on various occupations, lifestyles, etc.

My own insurance (covering just about everything) cost around $6k. The premium for my life insurance is higher than usual because I enjoy some dangerous sports.

I also got 'level cover' which costs a bit more initially but doesn't increase with age.

Thanks, Peter.

We are both late 40s . . . which is why ours might be a bit higher than SandyFeet's.

What are some ways of bringing the premiums down? I will ask about level cover (as our quote is for Stepped.) Also, the profession quoted is ANY. I will see if it's cheaper for desk-type jobs (which is what we both do).

Cheers.

 

[MIW]

Hello everyone,

I am not sure if this is the right section for this post, but here goes.

My husband and I are in the process of setting up a self managed super fund.

As part of this process, we've been getting quotes - via a financial advisor - for insurances. Specifically, life, TPD and income protection.

Given we didn't have any of these insurances in the past, we are reeling a bit from the quotes. I am beginning to wonder if the prices are fair/reasonable.

For those who are willing to share, do you mind me asking what premiums you pay for your insurances? I do realise everyone's situation is different, but at the same time, my husband and I wouldn't be too out of the odinary - both in our late forties, non smokers, good health, both earn about $80K.

Thanks.

H.

LI should be paid from SMSF, the rest privately.
Also, ask for projections for you and husband for the next XX years (years required, say till 60 or 65, what's appropriate for you both). The projections are so useful as said before, the premium increases significantly towards later years. Ask for projections on 'stepped' or 'uniform' insurances and this may help you if you have more years ahead.....
I think the premiums projections also include 5% CPI so it's up to you what you really require, so good luck.
I paid Income protection for many years when in accumulation phase but now stopped for many reasons (can sell IP, or downsize paid off house, only 1 child left at school and finishing soon, have alternate income, etc... basically have alternate sources to provide for income).
I only now pay LI for spouse, the breadwinner, via SMSF, but it is stepped premium, so becoming each year very costly (nearly exponentially).
It really depends on various factors and your particular circumstance, so IMO, I think you cannot get a guide by comparing to other people, rather you should be comparing various insurance companies and comparing 'apples' with 'apples' type of products for your situation!
I hope that helps!

 

[Peter_Tersteeg]

If you think premiums are high now, ask for a projection of what they'll be like in 10 years under stepped. That's why I chose level.

In your late 40s, one of the reasons your premiums are high is simply because of your age. Looking at the premiums you'll probably wish you had set up level premiums when you were 20 (and invincible). If you find a way to address this problem, please let me know.

Do you have any exclusions or loadings? Many of the reasons for these can be mitigated or reduced. You can also request a reassessment later if you no longer have that reason.

 

[Scott No Mates]

TPD cost increases depending upon the waiting period (the longer you can afford to hang out before receiving benefits the cheaper it becomes 1, 2 or 3 months), the period of coverage (2 years or until age 65 - big difference).

 

[EN710]

Probably compare a couple of providers? Some of them have calculator

I just moved roles and temporarily moved my super to ING to limit management cost, they have insurance calculator here, ended up with something slightly cheaper with similar cover for Life, TPD and income protection ($46 p/m compared to $53) http://ingdirect.toowards.com/insurance

 

[Harriet]

LI should be paid from SMSF, the rest privately.

Hi MIW.

Why is this? It's been recommended to us that we own all three insurances (Life, TPD, and income protection) in the SMSF.

Thoughts?

 

[Harriet]

Probably compare a couple of providers? Some of them have calculator

I just moved roles and temporarily moved my super to ING to limit management cost, they have insurance calculator here, ended up with something slightly cheaper with similar cover for Life, TPD and income protection ($46 p/m compared to $53) http://ingdirect.toowards.com/insurance

Thanks a million. That calculator is very useful, as it sheds light on the areas where money can be saved.

 

[Rolf Latham]

comparing premiums without comparing benefits, limitations and requirements is akin to expecting a mid level euro car for safety and buying a bottom end Proton or Chery j2 and expecting similar safety performance.

ta
rolf

 

[speary]

Hi MIW.

Why is this? It's been recommended to us that we own all three insurances (Life, TPD, and income protection) in the SMSF.

Thoughts?

If you have income protection and TPD inside your SMSf, if you claim on the policy, the funds will likely be paid to your SMSF, which means you may not be able to access the funds, as you need to satisfy a condition of release. It's beneficial as you are not out of pocket personally but in the case that you are TPD you want to be able to access the funds.

 

[neK]

TPD cost increases depending upon the waiting period (the longer you can afford to hang out before receiving benefits the cheaper it becomes 1, 2 or 3 months), the period of coverage (2 years or until age 65 - big difference).

I think Scott means Income Protection here.

 

[neK]

If you have income protection and TPD inside your SMSf, if you claim on the policy, the funds will likely be paid to your SMSF, which means you may not be able to access the funds, as you need to satisfy a condition of release. It's beneficial as you are not out of pocket personally but in the case that you are TPD you want to be able to access the funds.

TPD with an Any Occupation also meets the SIS conditions of release. So funds will be paid to the SMSF and one will be able able to access them.

Where the TPD definition is Own Occupation, it might meet the criteria to be paid out by the insurer, but fail to meet the SIS conditions of release.

Income Protection condition of release is payable under temporary incapacity in a form of an income stream.

 

[neK]

Hi MIW.

Why is this? It's been recommended to us that we own all three insurances (Life, TPD, and income protection) in the SMSF.

Thoughts?

Life and TPD held in personal names are not tax deductible where as holding them via superannuation (which a SMSF is) can be made with pre-tax dollars.

However tax may be payable through a life policy depending on who the beneficiary is. As for TPD, the amount of taxable / tax free depends on when your Eligible Start Date is, your retirement date, your current age.

For Income Protection the premiums are tax deductible if held in your personal name, or your can hold the policy in your super and make pre-tax contributions to cover the premiums.

If you adviser has not bothered to explain the differences between Any / Own occupation, agreed / indemnity value, stepped / level premiums, Tax between personal vs super - I would go find a new a adviser.

Here's some 'light' reading material
https://www.macquarie.com.au/dafile...ns-and-outs-of-insuring-through-super.pdf?v=4

 

[Mr. Fabulous]

Harriet, there are so many different variables that go into insurance premiums, attempting to compare your quotes with those of other people would be a complete waste of time.

 

[Mr. Fabulous]

TPD cost increases depending upon the waiting period (the longer you can afford to hang out before receiving benefits the cheaper it becomes 1, 2 or 3 months), the period of coverage (2 years or until age 65 - big difference).

That's Income Protection, not TPD buddy.

 

[Rob G.]

If SMSF is correct for you ...

If life or disability insurance is right for you ...

If you leave a modest balance in an industry fund (low fee fund) then insurance through them may be much cheaper due to bulk discount.

Also, the fund may arrange for the premium to remain roughly constant. However the benefits may scale back as you get older to compensate. But then again, you should have less dependents when you get older anyway !

Remember that insurance is a financial product and so is peddled by financial planners. It is unlikely that you will get unbiased advice in relation to your SMSF since that is the golden goose for commissions. You are out there on your own so better do your homework.

 

[sandyfeet]

Thanks for that.

Is that the total for both of you, or each?

Quite a bit cheaper than ours. We are looking at $6700 (total). Ours would be owned by our super fund, and tax deductible. But still . . . that's a big chunk.

total for both, but as stated above, our quote is useless as a comparison as we most probably have quite different circumstances