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Life Insurance, Mortgage Insurance, Income Insurance etc

Discussion in 'Accounting & Tax' started by Jmillar, 13th Jan, 2016.

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What Insurance do I need?

  1. Life Insurance

    77.8%
  2. Mortgage Insurance/Protection

    11.1%
  3. Income Insurance

    88.9%
Multiple votes are allowed.
  1. Jmillar

    Jmillar Well-Known Member

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    Hi guys,

    I'm 23yo with 4 IPs (buying another 2 soon) and when speaking to ANZ today regarding a refinance they're setting up a meeting with their financial planner to discuss life insurance, mortgage insurance, income insurance etc.

    At the moment I only have whatever cover is included in my super - will have to check what this includes.

    Just wondering whether I need any/all of these?

    I figure I don't need life insurance, as the value of my assets outweighs my liabilities, so if I die, my assets can be sold and all my debts will be paid. I have no dependables.

    I'm not sure what mortgage insurance/protection is - I've already got LMI; but this covers the banks, not me, correct? Assume it covers my mortgage under certain circumstances, but if I got income insurance then assume this would negate the need for mortgage insurance?

    Income insurance - I'm guessing this is something I should look into in case I get injured. Only issue is I'm in sales and have a low salary ($50k) and most of my income comes from commission (will be circa $200k this year) - so I'm not sure whether income insurance would cover me based on this full amount, as commission can obviously vary significantly (next year it could be $0, or could be $500k). If I get injured and can't produce income then I'm useless to my company, so assume life insurance would be important for me?

    Just wondering what peoples' thoughts are regarding what I need, and who I should be talking to for this? I assume ANZ financial planner is not the best person to speak to and I should talk to someone independent?

    Cheers
     
    Taku Ekanayake likes this.
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    see what they have to say, but remain sceptical.
     
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  3. No Probs

    No Probs Well-Known Member

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    I'll be following this thread closely, I've been thinking the same thing lately as I also only have insurance through super (which I'm not even sure what this would cover).
     
  4. Magnet

    Magnet Well-Known Member

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    You could also meet with an insurance broker not affiliated with a bank and compare the recommendations. We intend to do this this year. We have 3 IP's and intend on buying 2 more this year. We have kids so we need to get our act together. Our idea is to top up the cover we already have with super etc. working backwards from worst case scenario to come to the $ figure of cover we need and subtract what we already have
     
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Bankers are trained to cross sell - so no surprises that they'd refer you on to their insurance person.

    That's not to say that insurances aren't important - they are.

    I just wouldn't rely on advice from a lender - personally, I'd speak with a good planner about options.

    Cheers

    Jamie
     
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  6. Jennifer Duke

    Jennifer Duke Well-Known Member

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    Interested to read this too.

    Have been looking closely at income protection (particularly given I work in the media). Life insurance = meh, we don't have kids so not so bothered.
     
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    With appropirate life insurance and income protection insurance, mortgage protection insurance is completely redundant.

    As everyone else has mentioned, get good independant advice on this. The banks have been pushing personal insurances very hard over the last 6 months, but they're pushing product, not advice.
     
  8. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    @Jmillar - $200K at 23y.o.
    You da man
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Life insurance would often be cheap through your employer super scheme. You may already have that cover. Check.

    Banks have become a sales office for a broad range of products. The financial planner may be paid a salary by the bank but will have a sales target and likely earn bonuses and will show you only the bank products.

    Mortgage repayment insurance (called protection plans often) can be a real dud and recently copped a spray in the media as a con. . It ONLY covers the loan repayts and is hard to claim with short claim duration (ie 3 months). Its like a limited value life policy plus income protection benefit...Why not just get those policies ?? Where it fails...
    - Your IP are paid by rent, not your income. Generally protection plans are not written for IPs as they aren't covered. Just you own home !!
    - Income cover is often restricted to "total disablement". That's a tough definition. Stepehen Hawkins might not meet that definition ? Super TPD cover may be cheaper.
    - If the tenant stop paying rent its not eligible either
    - The death benefit is limited to the debt. Why not take out cheaper life cover in super ?
    - Typically have low policy limits ie income 50%.
    - Generally have short claim periods ie 2 years. Not until age 65.
    - They have high commissions to advisers and this reflects in premiums

    Listen to what they say and sign NOTHING.
     
  10. Jmillar

    Jmillar Well-Known Member

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    Hi all,
    Thanks for the info - that confirms what I thought (ie don't listen to the bank, get independent advice). I've cancelled the meeting with the financial planner at the bank.

    Will report back on what the independent advisor recommends etc

    Cheers
     
  11. KayTea

    KayTea Well-Known Member

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    It's all well and good to say "I've got insurance through my super", but you really, really do need to read the fine print.

    For example, a number of industry-based super funds provide income protection insurance that will only cover your lost income for 2 or 5 years, and at age 23, there are still likely to be many working years ahead of you (assuming that you can't live entirely off passive income from your IPs yet). In the event of a major accident or injury, you may survive (so not be entitled to a life insurance payout), but may need to take many years off work. Can I suggest that, when considering income protection insurance, you also look at TPD (Total Permanent Disability) and Trauma insurance as well.

    Also, something else that is in the fine print of many policies are things such as 'own' versus 'any' occupation. Also, looking into agreed value policies and opposed to indemnity policies. These things hugely effect whether or not you can get any sort of payment or make a claim, and with the wrong policy, you may has well have had no policy (actually, you'll be worse off, as you may have spent years paying for 'coverage', only to realise that you really aren't adequately covered, and you can't claim).
     
  12. devank

    devank Look, lets just get on with this, ok? Premium Member

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    I have recently joined an Insurance company. Apparently, I'm not even supposed to give my opinion at a friend's BBQ!
    Ignoring my first-week training, given your young age & high income, I think you should get Income Protection (long waiting period but until age 65) & TPD. You should also have enough buffer in your offset account for say 2 year period.

    There are few additional benefits in getting the Income Protection with the bank you have the mortgage. I believe onePath (ANZ's branch) is very competitive so don't ignore it. I'm not working for onePath :)
     
    Last edited: 14th Jan, 2016
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  13. JPP

    JPP New Member

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    TAL retail IP best in the market, get it leveled, and get an agreed value policy.
     
  14. Dwalsh

    Dwalsh Well-Known Member

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    Your doing well, what are you in sales for ? Also if your properties pay for themself and you have a buffer in place then this might be enough. Workout what you live off and then how many weeks/ years you feel comfortable for your buffer, that way you know you will get paid if you lose your job. I don't trust these company's, they're always looking to get out of claims.
     
  15. Vixs

    Vixs Member

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    Life insurance may indeed be cheaper through an employer scheme. Is it guaranteed renewable? Are the terms of the contract subject to change over time and can benefits be removed without your consent? Are the policies subject to underwriting at claim, or have they been underwritten at the time of application so that claim time is easier? Do benefits end if you change employer? Is there the ability to take the cover with you, seeing as most of us don't have a single employer for life these days.

    Re: offering only their own products - wrong. Don't know about ANZ but working for another major bank I have several major insurers on my approved product list and the ability to write other life insurers when I have a reasonable basis (which I often do).

    What impact does a blanket recommendation to put cover through super have on their future retirement income?

    Stick to tax advice Paul, you're excellent at it, but your opinions on insurance are as dangerous as my opinions on tax advice.

    The planner you were booked in to see at the bank may have been good at their job, or they may have been crap at it. Same goes with planners that don't work in banks. The individual you deal with will have the biggest impact, so it won't hurt to see at least 2 to see who you feel has your best interests in mind. If it makes sense and it achieves your goals, then it shouldn't matter where you hear it.

    If I needed 2 years worth of expenses as a buffer in the bank I'd be sitting on $200,000. The point of insurance is so you don't need to self-insure for that long. With good quality income protection, trauma & TPD you don't need 2 years worth of buffer, and that's why you pay a premium - so you can use your money for something else.

    Based on what information? This is why you can't give personal advice without knowing your client. I don't have a problem with TAL, I've recommended it often, but uninformed blanket statements don't cut it for 'advice'.
     
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