Faqs

Life Cover

How does it work?
This insurance pays a lump sum if:

• you die, or
• you’re diagnosed with a terminal illness.

Why have it?
When you think about it, your life is your most valuable asset. And like other valuable assets (such as your home, car or boat), you should protect it so if something happens your family is looked after. Life Cover can help do this by paying a lump sum in the event of your death or diagnosis of a terminal illness. This money may help with your mortgage payments, your children’s education expenses, or go towards creating an income for your family’s future.

How much cover do I need?
Most review their life insurance at key stages during their lives; examples:

• getting married
• arranging a mortgage or a loan
• starting a new job
• the birth of children
• buying a house
• establishing a business

There are two premium options available:

• Stepped Premiums, which are based on age and recalculated each year on the policy anniversary, and
• Level Premiums, which are based on your age when the policy is started and remain the same throughout the term of the policy.

Life Cover within Superannuation

How does it work?
Life and TPD cover is generally available through most super funds but does typically have restrictions over the amount of cover offered, how much cover is available without medical evidence; and can have age restrictions on cover.
Premiums are payable from the super fund and do not impact day to day cash flow.

Why have it?
Life Cover can help do this by paying a lump sum in the event of your death or diagnosis of a terminal illness. This money may help with your mortgage payments, your children’s education expenses, or go towards creating an income for your family’s future.
Estate Planning issues need to be carefully considered for this type of cover.

Total and Permanent Disablement (TPD) Cover

How does it work?
This insurance pays a lump sum if you suffer Total and Permanent Disability (TPD).

Why have it?
If you’re totally and permanently disabled, TPD Cover can help ease the financial pressure on you and your family by providing a lump sum payment which can be used to pay medical bills, make home modifications, generate an income if you can’t work again, or even assist with ongoing expenses like paying off the mortgage.

There are two premium options available:

• Stepped Premiums, which are based on age and recalculated each year on the policy anniversary, and
• Level Premiums, which are based on your age when the policy is started and remain the same throughout the term of the policy.

Critical Illness or Trauma insurance

How does it work?
This insurance pays you a lump sum if you suffer a critical/traumatic condition.
There are typically basic and comprehensive insurance coverage available. Your financial adviser can help you work out which is the most appropriate for you.

Why have it?
Living expenses alone during a time of critical illness could easily set you back $60,000 – $80,000 a year, not including the cost of medical treatment and rehabilitation.

Trauma Cover pays you a lump sum payment if you’re diagnosed with a serious medical condition (as defined in providers PDS). You can use the payment to help with the cost of your medical treatments, and for everyday expenses like your mortgage or rent so you can concentrate on getting better.

You can choose to have this insurance as a stand-alone policy or as an extension to your Life Cover.

There are two premium options available:

• Stepped Premiums, which are based on age and recalculated each year on the policy anniversary, and
• Level Premiums, which are based on your age when the policy is started and remain the same throughout the term of the policy.

*Level premiums are not available on standalone policies.

Income Protection insurance

How does it works?

You’ll receive a monthly benefit for each month you’re:

• Totally Disabled, or
• Partially Disabled.

Generally there are multiple types of insurance available depending on your occupation. Your financial adviser will help you work out which is the most appropriate for you.

You can select the appropriate qualifying periods depending on your needs. Generally you can choose between 14 days to 2 years Waiting Periods and the Benefit Periods vary from 2 years, 5 years or reaching age 65.

When do benefits end?
Payment of benefits usually will continue until:

• You stop being Totally or Partially Disabled
• You reach your maximum benefit period, or
• Your Income Protection insurance ends

Why have it?
Income Protection Cover is designed to replace up to 80% of your monthly income if you’re unable to work due to sickness or injury—making sure bills and expenses can still be paid while you’re recuperating. Having this cover gives you peace of mind to concentrate on recovering and getting back to work, rather than worrying about your investments or savings diminishing. Some of your premiums may be tax-deductible, depending on your individual circumstances.

There are two premium options available:

• Stepped Premiums, which are based on age and recalculated each year on the policy anniversary, and
• Level Premiums, which are based on your age when the policy is started and remain the same throughout the term of the policy

Income protection for medical professionals
We understand the nature of your profession exposes you to unique risks that require specific benefits. We offer policies that have a number of built-in benefits tailored to protect you against these professional risks.

Blood borne diseases
If you are diagnosed with HIV or Hepatitis B or C, they’ll deem you to be totally disabled or partially disabled if your income is reduced as a result your condition and you meet their stated requirements. Becoming disabled while you’re overseas

We understand that your job can take you overseas for fellowship years, special placements and career development. If you’re overseas and become disabled, some of our offers include an Overseas Assist Benefit that will reimburse up to $10,000 for you and your immediate family members to return to Australia.

Worldwide Cover

Wherever you are in the world, you’re covered 7 days a week, 24 hours a day. This includes when you travel, move house, change jobs, or become unemployed.

Group insurance

The problem
What is your Company Policy when one of your employees is required to be absent from work for an extended period due to injury or illness? Are you prepared to put that in writing?

How does it work?
We help employers develop company policy to best manage the inevitable event of an employee suffering an illness, injury or death.

Why have it?
The goal of that company policy must be to ensure that in such an event the employer is always able to act as they so desire without the risk of any of the following:

• Creating a precedent that they would not wish to support in the longer term
• Be seen to be discriminating between one employee and another in similar positions within the organisation
• Commit the organisation to an expense it could not reasonably afford
• Being forced into terminating the employ of Key individuals whose loss to the company could have serious economic complications, e.g. if a key employee were injured subsequently recover and return to work for a major competitor

Secures retirement benefits
By adding super contribution benefits cover we ensure that even a short period of disability does not impact on a person’s eventual retirement lifestyle, no other type of programme can provide this security.

Customised to your business
Group Insurance offers many flexible solutions to ensure that the program finally developed is both effective and cost efficient.

The value of salary continuance insurance

Improves Staff Morale
We know from experience that employees are concerned about injury or illness, but only a few do something about it. Most employees are actually relying on their employer’s support should anything serious occur.

Our experience has shown that by formalising a disability benefit programme an employer receives greatly enhanced support, recognition and loyalty from staff.

Secures Key staff in the event of Injury or Illness
The first right to rehire employees who have been absent from work with illness or injury can be an extremely important benefit to a company. Who wants to see their key staff move to a competitor?

Maintaining the income of a staff member who has become sick or injured for an extended period of time enables employers to retain the relationships much more effectively than if income payments have ceased.

Tax effective
Group Salary Continuance (‘disability’) Insurance is the only benefit that is 100% tax deductible with no Fringe Benefits tax implications.

Reduces moral obligations
By having an insurer managing a disabled person’s claim and their return to work, the company can be assured that the individual will be returning at the correct time and pace and they need not feel any obligation, legal or moral to go beyond their standard obligations as to offering a job or continued benefits.

Assists in attracting new staff
Group Salary Continuance cover is obviously of high value to potential employees. It helps position the company as an attractive organization to work for. In addition, the cover has a true monetary value which assists the employer deliver a more attractive remuneration package for a relatively low cost (typically about 1% of payroll).

Your duty of disclosure
Before you enter into a contract of life insurance with an insurer, you have a duty, under the Insurance Contracts Act 1984, to disclose to the insurer every matter that you know, or could reasonably be expected to know, that is relevant to the insurer’s decision whether to accept the risk of the insurance and, if so, on what terms.

Non-disclosure
If you fail to comply with your duty of disclosure and the insurer would not have entered into the contract in any terms if the failure had not occurred, the insurer may avoid the contract within 3 years of entering into it. If your non-disclosure is fraudulent, the insurer may avoid the contract at any time.

Who will receive the benefits of my cover?
Insurers generally pay all benefits to the policy owner unless they specify otherwise in their PDS.
If you die, they’ll pay any benefits to your personal legal representative or a person they’re authorised to pay under the relevant law. If you have Life Cover, TPD Stand Alone Cover or Trauma Stand Alone Cover and the policy is self-owned, you can nominate beneficiaries to receive any death benefits payable rather than having them paid to your estate. They’ll pay any benefit payable as a consequence of your death in accordance with that nomination. Where a nominated beneficiary is under the age of 18, a trust deed may be required so the benefit can be held for them in trust.

Agreed Value or Indemnity
The monthly benefit amount they’ll pay under the Totally Disabled Benefit depends on whether you select Agreed Value or Indemnity.

Agreed Value
Under Agreed Value, the monthly benefit is the amount the insurer agrees on when they accept your application including any increases under Automatic Increase, regardless of any subsequent rise or fall in your income. Agreed Value is not available for some policies owned through superannuation Master Trusts.

Indemnity
If Indemnity is selected, proof of income will be required at time of claim. This could be time consuming and add delays to you assessment and subsequent payment of benefits.

In this section, we summarise the taxation treatment of different types of insurance. The tax implications can vary, depending on the reason the insurance is purchased and the person (or the entity) who owns the policy.

What are the tax implications of Life insurance?

Note: This taxation information is based on MLC’s understanding of current legislation and Australian Taxation Office practice as at 1 July 2012.
Our comments are general only. The taxation treatment may vary according to your individual circumstances and may not apply in all cases.

What are the tax implications of Total and Permanent Disability (TPD) Insurance?

What are the tax implications of Critical Illness insurance (when the benefit is paid as a lump sum)?

Income Protection & Business Expenses Insurance

What are the tax implications of Income Protection and Business Expenses insurance? Scenario What tax concessions are available? Are the benefits assessed as income? Are the benefits subject to Capital Gains Tax? Where an individual owns The individual may be able to claim the Yes – the benefits are assessable to No The policy on their own life and the premiums are paid by the individual for personal protection purposes Premium as a tax deduction The individual Where an individual owns the policy on their own life and the premiums are paid by the individual’s employer The employer may be able to claim the premiums and related fringe benefits tax (FBT) as a tax deduction.” Yes (as above) No Where the trustee of a superannuation fund owns a policy on the life of a fund member (Income Protection insurance only) The Trustee may be able to claim the premium as a tax deduction. At the fund member level:

• Self-employed and other eligible people can claim their personal super contributions as a tax deduction.
• Employees can arrange to make pre-tax (salary sacrifice) super contributions.

Note: These super contributions will count towards the member’s concessional contribution cap Yes (as above) No

1. Consideration may be monetary or otherwise but does not include premiums paid on the policy.
2. FBT of 46.5% is payable on the taxable value of the premiums.
3. The government has proposed to ban the provisions of ‘own occupation’ insurance in all superannuation funds, however at the time of printing this guide this proposal had not yet been legislated.
4. To qualify as self-employed for this purpose, you must earn less than 10% of your assessable income, reportable fringe benefits and reportable employer super contributions from eligible employment.
5. Includes a spouse (legally married or de facto including same sex), a former spouse, children under age 18, a financial dependant and a person in an interdependency relationship with the deceased.
6. Includes a Medicare levy of 1.5%, where not paid via the deceased’s estate.
7. A defined relative includes:
   1. the person’s spouse, or
   2. the parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child of that person, or of that person’s spouse, or
   3. the spouse of a person referred to in paragraph (b).
8. It’s generally unlikely for a capital gain to be higher than the amount otherwise assessable as income.
9. Applies for the 2012/13 financial year (and post-June 1993 components prior to 1 July 2007) when taken as cash from age 55 and under 60.
10. A defined relative includes:
    1. the person’s spouse, or
    2. the parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child of that person, or of that person’s spouse, or
    3. the spouse of a person referred to in paragraph (b).
11. FBT of 46.5% is payable on the taxable value of the premiums.
12. It’s generally unlikely for a capital gain to be higher than the amount otherwise assessable as income.
13. The taxation implications for partnerships, trusts and sole traders may vary depending on the individual circumstances. It is recommended that you seek advice from a professional who is a registered tax agent.

Keep your insurance going in tough times

During tough economic times, you may look for ways to cut your expenses. However, when reviewing your budget, insurance should be one of the last items examined.

If the unthinkable were to happen and you didn’t have adequate insurance, the financial impact on you and your business could be quite dramatic.

Regardless of whether you’re feeling the squeeze right now or looking for ways to reduce your expenses, there are a number of ways many of us can make insurance cover more affordable.

Buy your insurance in super

If you buy your insurance through a super fund, you may be able to take advantage of a range of tax concessions generally not available when insuring outside super.

Alternatively, you could arrange to have your premiums deducted from your existing superannuation account balance without making additional contributions to cover the cost. This can make your insurance affordable if you don’t have sufficient cash flow to fund the premiums.

The trade-off with this option is that you will use up some of the money that could otherwise meet your living expenses in retirement.

While this could impact your lifestyle when you are no longer working, think of what could happen to your family’s lifestyle in the interim if the worst were to happen.

Without insurance, your family could run down your savings very quickly and face financial difficulty well before your intended retirement date.

Pay level premiums

If you elect to pay level rather than stepped premiums, you could reduce the long-term cost of your insurance considerably (see Strategy 8). This is because, over time, level premiums can end up cheaper, often at a stage in life when you need the cover the most.

Pay your premiums annually

In some cases, you may be eligible for a discount if you pay your premiums annually, rather than monthly.

Consolidate your insurances

Holding all your personal insurances in the one policy could enable you to save on fees. Fee savings could also be made by consolidating the insurances held by yourself, your spouse and other family members (in some cases) into the one policy.

Choose a longer waiting period and shorter benefit payment period for Income Protection

Most Income Protection insurance policies enable you to choose how long you will need to wait before the insurance benefit will start to be paid and how long it will be paid for. Choosing a longer waiting period and a shorter benefit payment period can reduce your premiums, in some cases significantly.

Reduce the sum insured

As a last resort, you could consider insuring yourself for a lower amount.
If something were to happen to you, this would clearly be a better option than cancelling your insurance completely.
But you also need to keep in mind that reducing the sum insured could leave you (or your family) without sufficient money to meet your financial goals should the unthinkable happen.
To find out how you could make your premiums more affordable, we recommend you speak to a financial adviser.