The value of adviser-managed insurance
By Jemma Bailey, Financial Planner
Adviser-managed insurance is tailored to your income, commitments and the people who depend on you. Your adviser can recommend suitable cover, structure it inside or outside super, review it as your circumstances change and support you through the claims process.
Important things to know about adviser-managed vs group insurance
- Group insurance is designed for thousands of members, not specifically for you
- Default cover may be inadequate, change or cease without you realising
- Adviser-managed insurance is tailored to your needs and includes support when it is time to claim.
Many people assume they are adequately insured because they have automatic cover through their super fund.
It is convenient. Premiums come from your super balance, cover may be provided without medical checks and there is nothing extra to organise.
But having insurance and having the right insurance are two very different things.
Group cover is not personal cover
Insurance through super is generally a group policy with standardised terms and benefit levels. It is designed to cover a broad membership base rather than your particular circumstances.
It may not take into account:
- your income, debts and financial commitments
- the needs of your family or business
- your occupation
- treatment and rehabilitation costs
- how long you would need income support.
ASIC also cautions that group insurance is designed for large numbers of people and may not suit every individual member.
Insurance cover can change or disappear
Insurance through super may cease if your account becomes inactive, your balance becomes too low, you change funds or reach a specified age.
Even when the cover remains in place, the insured amount may fall well short of what is needed to repay debts, replace lost income and support the people who depend on you.
The policy definitions also matter. Total and permanent disability and income protection cover can include eligibility requirements that affect if a claim is paid.
Premiums are deducted from your super balance, so they also reduce the amount invested for your retirement.
This does not mean all insurance held through super is unsuitable. In some circumstances, funding certain premiums through super can be affordable and tax-effective. The real question is whether or not the cover has been deliberately selected and structured for you, or simply accepted because it appeared automatically.
What adviser-managed insurance provides
Adviser-managed insurance starts with you, not with an existing policy. An adviser can help you determine:
- the types and amounts of cover you need
- suitable policy definitions and benefit periods
- if cover should be held personally, through super or both
- how premiums will affect your cash flow and retirement savings
- when your insurance should be reviewed.
Some adviser-recommended policies may still be funded through super. The difference is that the policy, cover level and ownership structure form part of a considered personal strategy.
Someone in your corner when you claim
Insurance matters most when something has already gone wrong.
Research presented by CoreData found that 13% of members calling their super fund failed to connect on one or more attempts. Of those members, one in four never received a return call.
With group insurance, you or your family may need to deal with both the super fund and its insurer while coping with illness, injury or bereavement.
An adviser can help organise the documentation, communicate with the insurer and follow the claim through. At a difficult time, having someone who understands the policy and the process can make a meaningful difference.
Do not cancel existing cover without advice
Never cancel an existing policy until replacement cover has been assessed, approved and confirmed. Changes in your health may make new cover more expensive, subject to exclusions or unavailable.
If default insurance through super is your only cover, now is a good time to have it reviewed. The question is not simply about having insurance; it is making sure any insurance will provide the protection you, your family or your business expect when it is needed most.
Contact Carrick Aland’s Wealth Planning team on 1300 466 998 or visit carrickaland.com.au/protecting-your-wealth.
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Sources: Investment Magazine; Professional Planner; ASIC Moneysmart
