Heart disease and stroke continue to be the two most common causes of death⁵ in Australia for people over the age of 45 and accounted for over 30,000 Australian fatalities in 2012. Incredibly, thousands of Australians are underinsured or have no insurance in place to cover the expenses should they suffer a debilitating illness.

According to the Cost of Cancer in NSW ⁶report, the total expected lifetime economic cost of cancer – taking into account both the financial cost and the burden of disease (lost productivity, burden on healthcare system) – is almost $1m per person. Certainly for an individual being treated for cancer, out of pocket costs in excess of $100,000 are not uncommon. Many financial planners use a rule of thumb for calculating an appropriate sum insured which at minimum should allow for the removal of debt and the provision of one year’s income, but this is merely a starting point.

These initial figures should be considered along with the financial cost to the individual and family, and importantly the ‘true cost’ of the disease. 

You can rely on trauma insurance

Trauma insurance can cover between 10 to 50 medical events and will pay in the event you suffer a defined health trauma, regardless of your work status. It pays a lump sum to help cope and recover from serious health conditions such as cancer, strokes and heart attacks. Some insurers also offer partial payments for less serious conditions.

Medical advances have meant that our chances of surviving traumatic events are much better than in the past. However, the cost of treatment can sometimes be beyond your normal means. Without trauma cover, you may need to dip into your children’s education fund or your retirement savings; or you might even have to increase your mortgage to pay for expensive treatment.

The difference to income protection

Importantly, a trauma payment is not dependent on you being unfit to work (unlike income protection, where you need a doctor to certify your ongoing health). The diagnosis of a traumatic condition might mean that you physically could go to work, but would prefer to spend time with your family and reduce any work-related stress while you recover and consider how your future will be affected.

To make sure you don’t increase the statistics, check your policy documents to see which level of cover you hold, and speak to your financial planner if you are unsure. They can help you determine what cover you already have, what changes or additions may be appropriate and how to make them.

Speak to your Leenane Templeton Financial Planner to discuss your insurance options. Contact us at 02 4926 2300 or email success@leenanetempleton.com.au.

Source: Zurich

⁵ Leading Causes of Death, Australian Institute of Health and Welfare, www.aihw.gov.au/deaths/leading-causes-of-death.

⁶ Cost of Cancer in NSW, Access Economics Pty Limited for The Cancer Council NSW, 2007.

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When most people think about financial planning they tend to focus on the wealth creation side of things, but often forget about the wealth protection. Building a financial plan without adequate insurance is like building a house on flimsy foundations. 

Comprehensive insurance cover can be a significant expense; however these costs can be made more affordable by taking advantage of the tax deductions that apply to specific types of insurance, and to some methods of implementing insurance. 

Income protection

Due to the high frequency of claims, premiums for income protection insurance can be quite high. However, they are tax-deductible, so the cost is discounted at the same rate as the policy holder’s marginal tax rate. For example, someone on a marginal tax rate of 39% (including 2% Medicare levy), paying a premium of $1,000 would have an out of pocket cost of just $610, after the tax deduction is claimed. 

It needs to be remembered, however, that any benefits paid under an income protection policy are treated as assessable income, and therefore subject to tax. 

Life insurance

While the premiums for life insurance are not normally tax-deductible to individuals, there is a simple way to gain a tax benefit. Superannuation funds can claim a tax deduction for the life insurance premiums they pay. So by taking out life insurance via a superannuation fund, the end result is the same as if the premium was deductible to the person taking the insurance. 

Using superannuation to provide life insurance has another potential benefit. As premiums are paid by the fund, it reduces the pressure on household cash flow. This may reduce the ultimate superannuation payout, but if the savings made outside of superannuation are used wisely, the overall financial position should be improved. 

The proceeds of life insurance are not generally taxable. However, a death benefit paid from a super fund to a non-dependant may be subject to some tax. 

Total and permanent disability insurance (TPD)

TPD insurance is usually attached to life insurance. From a tax perspective it’s treated in a similar way, so implementing it via superannuation is usually the most tax-effective way to do it. 

Trauma insurance

Trauma insurance pays a lump sum if the policy holder suffers a defined medical condition or injury. It cannot be implemented through superannuation. Premiums are not tax-deductible, and benefit payments are not subject to tax. 

As with investing, the main focus on insurance shouldn’t just be on saving tax. It is a protection tool. Always talk to a qualified adviser to ensure you get the appropriate level of cover, and the most tax effective way to implement it. 

Our risk management and accounting teams are ready to help. 
Call (02) 4926 2300 or email us. 

If you have any questions in relation to the tax advantages of insurance please contact our team at Leenane Templeton today!

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Australians are becoming more educated about their health – whether it’s actively pursuing preventative measures or a greater awareness of healthcare options. Combined with improvements in medical technology and clinical practices, there has been a marked decline in the rate of dying from major health conditions in recent times. For example, the death rate from male cancer over the 20 years to 2007 fell by 16 percent. Due to this change in lifestyle and development in research we are living longer and therefore need to take measures to protect ourselves against survival. One aspect you need to determine is whether or not you are protecting your financial security.

Living longer

Australians are living longer – and with that is the increased likelihood you’ll experience a major health issue. But survival rates are also on the increase due to medical advancements.

• Cardiovascular disease is the number one cause of death in Australia but has increasing survival rates
• Long-term survival rates among stroke patients has more than doubled since the ‘70’s

The number of Australians living with long term health issues is also increasing. It’s estimated that as many as 1.7 million Australians have undiagnosed ‘type 2’ diabetes. More than 4 million Australians are living with some form of disablement.

Protecting your financial security

If the unforeseen was to happen to you, how would you protect yourself and your loved ones? Consider the financial impact of absences from work and medical expenses. Without a plan you may struggle to maintain your lifestyle during recovery.

Part of your plan should include considering personal insurance to protect you financially against serious disablement or illness.

Trauma or Total and Permanent Disablement – or both?

Many Australians have some type of insurance cover through their super – but are you sure it will be enough or it will cover you if you suffer a serious health condition and survive?

Trauma and Total and Permanent disablement (TPD) cover will pay you a lump sum benefit which will assist in improving the quality of your life. Importantly, it gives you choices – treatment and rehabilitation, future employment options, home modifications. Each one is unique to your circumstances.

Trauma cover pays a lump sum if you suffer a serious health condition or trauma event such as a heart attack or cancer. Trauma cover provides the financial assistance you need so you can focus on your recovery. It is worth noting that trauma cover is not usually available through your super fund so this type of cover is definitely worth considering.

If you were to become totally and permanently disabled and were unable to work again, then payment of a TPD benefit would provide financial relief. TPD covers illnesses and injuries that are not usually covered under trauma cover. The lump sum can be used to meet immediate expenses and payment of debt and can also be structured to provide an income for you and your family over the long term. If you do have TPD cover in your super, you’ll need to assess whether it’s enough?

Make sure you get the most appropriate amount of cover

The consideration is usually less about which cover is right for you but how much of each type of cover you need. At such a stressful time, the last thing you want to think about is money issues. Personal insurance is an effective way to protect you and your loved ones from the financial distress that many illnesses can cause.

Source: AIA Australia, May 2014

1. AIHW – Australia’s health: In brief (2010)
2. Australian Bureau of Statistics (2008 – 2011)
3. AIHW – Cardiovascular disease mortality: Trends at different ages (2010)
4. Stroke society of Australasia (2011)
5. Diabetes Australia (2011)
6. Australian Bureau of Statistic (2009)

Disclaimer

Speak to one of our qualified risk management specialists or financial planners, so that you can get the help you need to protect your financial security.
Call (02) 4926 2300 or email us.

The post Protecting your financial security appeared first on Newcastle Financial Planners & Financial Advisors.

Dr Barnard saw a need for financial assistance for patients who suffered a significant illness or accident.  “When I went into private practice I could not help but notice that while many patients eventually fully recovered medically, they suffered severe financial problems. This was not because of the cost of the operation but because of the disruption to their lives and their loss of income,” Dr Barnard said.
 

Trauma insurance can fill this gap. Where total and permanent disablement (TPD) requires you to be unlikely to work again, and income protection pays if you are unable to work either temporarily or permanently, trauma payments require you to meet the definition of one of a list of specified diseases and injuries.  So it’s not about the level or length of the disability; rather, it’s based on the diagnosis.
 

You may have heard trauma insurance referred to by another name, such as living, critical illness or crisis recovery. Trauma insurance can be complicated, with different policies covering different conditions, each with specific definitions. 
 

Initially, just a handful of conditions were covered: cancer, heart attack, stroke and coronary artery surgery.  This list has expanded and some policies cover up to 40 conditions including degenerative diseases like multiple sclerosis and Parkinson’s disease, paralysis, comas, loss of speech, deafness, chronic organ failure, major organ transplants, occupationally acquired HIV and even severe rheumatoid arthritis.
 

Because trauma insurance provides a payment based on diagnosis, rather than the level of impairment, working out the right sum insured is complicated. Consider that for cancer, a claim may be for a melanoma or may be for stage 3 lung cancer. Trauma provides you with a one-off lump sum so income and capital requirements need to be considered. Deciding the right amount of cover for you will involve a detailed discussion with your adviser around two key areas:
a) What will you need at the time of your illness/injury
b) What do you want your life to look like afterwards.
 

Income needs
 

Firstly, your adviser may consider your income needs. As income protection only covers you for 75% of your income, many advisers will recommend that you top this up to 100% with trauma. The period you allow for is up to you, although a general rule of thumb is to allow at least two years.
 

You may also consider the other income in your household. If you were undergoing treatment for cancer, or diagnosed with motor neuron disease, would you need and/or prefer for your partner to take some time out of the workforce to look after you and your family?
 

Having this option to step out of the workforce to concentrate on your recovery can make an enormous difference.
 

Medical costs
 

Secondly, you and your adviser may consider the cost to have access to the best medical care available. You should consider the cost of treatment, potential travel and accommodation along with ongoing therapy. It can be difficult to quantify how much could be required. The cost of treatment and loss of productivity from cancer has been estimated at hundreds of thousands of dollars in a report for the Cancer Council of NSW.
 

When looking at medical costs, it isn’t just about treatment costs. Having access to quality rehabilitation services will assist your recovery. Whether this be physiotherapy, wellness services, counseling or alternative medicine, your plan needs to include an amount to fund your recovery. 
 

Moving forward
 

Finally, it’s important to contemplate what changes you may like to make to your life.  Will you still have the same drive to return to work? Your priorities could change, and planning for this can give you the ability to reduce your hours or cease work entirely. If you’re working towards retirement, you may wish to bring this date forward. Your adviser can discuss with you how these objectives can be achieved, such as through replacing income or reducing debt, so that less income is required.
 

While trauma is not well known, you are more likely to claim on this cover than life or TPD insurance.  Spending time with your adviser to talk through your personal situation and plan for your individual needs is an important step in making sure you have the right level of cover in place.
 

Case Study
 

Eleanor is a 44-year-old anaesthetist.  She is married to Matt, an engineer, and they have two children aged eight and six. 
 

She discussed with her adviser how difficult it was to consider what she would do if diagnosed with a serious disease or injury, but there were a number of scenarios she was sure of. Eleanor knew that if she had to go through treatment for cancer, she wanted Matt to be able to care for her and the children. She also said if she was diagnosed with a degenerative disease like multiple sclerosis, she would want to change her priorities, step away from work and focus on her well-being.
 

With her adviser, they put together a sum insured that would cover 25% of her income for two years (her income protection policy will provide the other 75% if she is off work). They also calculated lump sum for medical care and enough to pay off their mortgage. While paying off the mortgage was not a specified need, the ability to do this would allow either Matt or Eleanor to cease working. While the future is uncertain, talking through and understanding their protection plan has given Eleanor and Matt confidence that they’ve prepared for the unexpected.
 

For more information on trauma and risk insurance, contact your our specialist advisors here at Leenane Templeton.
 

Source: BT
1. Cost of Cancer in NSW by Access Economics http://www.cancercouncil.com.au/wp-content/uploads/2010/11/costofcancer_summary.pdf
 

Disclaimer
 

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