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