What Factors Affect the Cost of Income Protection Insurance?
Let’s not beat around the bush–income protection insurance is not cheap. Nonetheless, there’s a good reason for that. You’re insuring your most valuable asset: your ability to earn an income.
That being said, not everyone pays the same rate. Two individuals earning the same salary might have very different premiums, and it often leaves most people wondering, “why is mine so high?” or “what’s actually driving the cost of my policy?”
So, here’s a proper breakdown of the key factors that influence the cost of your income protection insurance–the factors that insurers actually care about, and what you can (and can’t) control.
Your Job
This is probably the most important factor.
Insurers look closely at what you do for a living, because that tends to directly impact how likely you are to get injured or sick and how long you might be off the tools.
So, if you’re a tradie on-site every day, climbing ladders or handling heavy equipment, you’re bound to be rated as higher risk compared to, say, a marketing consultant sitting at a desk all day. It doesn’t matter how fit or experienced you are, it’s all about statistical risk.
Generally speaking, jobs fall into risk categories, and that changes your premium. The more physical or high-risk your work, the more you’ll pay in monthly premiums. Regardless, don’t let that put you off, income protection is even more essential if you do work in a risky role.
Your Age
No surprise here. The older you get, the higher your premiums.
Why? Because your risk of illness and injury increases with age. Insurers know that recovery can take longer, and the chance of something serious popping up (i.e. back issues or chronic illness) goes up as you get older.
That said, most of the time, if you lock in a policy while you’re younger and healthier, you can often hold onto the lower premium for the life of the policy. So, the earlier you sort it out, the better.
Your Health and Medical History
This one’s significant, and it can get complicated.
When you apply for cover, insurers will almost always ask about your health history. That includes any pre-existing medical conditions, past surgeries, mental health history, and lifestyle habits. If there’s anything in your medical background that raises a red flag, insurers might:
- Increase your premium value.
- Add exclusions to the policy.
- Or in some cases, decline cover altogether.
While it’s not always a dealbreaker, it will affect the cost of your policy. This is why being upfront during the application process is key. A good broker will help you navigate this without tanking your chances of getting covered.
Smoking and Lifestyle Habits
If you’re a smoker, you can expect to pay more–a whole lot more.
Smokers pay significantly higher premiums than non-smokers. Why? Well, because statistically, smoking increases the risk of just about everything, from heart disease to cancer and respiratory issues.
Other lifestyle factors such as heavy alcohol consumption or high-risk hobbies (i.e. skydiving, motorsports, mountaineering) can also affect your premiums or attract exclusions. Once again, it all comes down to risk. If you’re engaging in lifestyle habits or hobbies that make you more likely to get injured or ill, you’ll pay for it in the policy.
How Much You Want to Be Paid (Benefit Amount)
This one’s straightforward. The more of your lost income you want replaced, the higher your premium.
Most policies will cover up to 70% of your gross income plus super guarantee contributions, but you don’t have to insure the full amount. Some people choose to pay a lower benefit if they’ve got other savings, a partner’s income, or just want to keep premiums down. However, it’s important to remember not to short-change yourself when you’re off work and counting every dollar.
Waiting Period
This is the amount of time you’ll need to wait after making a claim before payments start coming through. Common waiting periods are 30, 60, or 90 days. The shorter the wait, the higher the cost. This is because you’re asking the insurer to step in sooner to process your claim. If you can afford to wait a little longer, maybe you’ve got enough sick or annual leave and some savings, you can bring the cost of the premium down.
Benefit Period
This refers to how long the policy will pay you if you’re off work long-term.
Options typically range from two years and usually up to age 65. The longer the benefit period, the more you’ll pay–but that also comes with more protection. If your injury or illness drags on, that longer cover can be the difference between financial stress and peace of mind.
Again, think about your job. If you’re in a role where recovery might take a while, or you’re your household’s main source of income, longer cover is worth considering.
Policy Type and Add-Ons
All income protection policies are indemnity (based on your income at the time of claim). Agreed value policies used to be more expensive and have been phased out unless you already have an existing older policy. Add-ons like indexation (where your benefit increases with inflation), will also raise the premium.
Need Help With Insurance? We’ve Got You
At the end of the day, income protection isn’t about finding the cheapest policy–it’s about finding the right policy.
There are plenty of moving parts that affect the cost, but with the right advice and a broker who listens to your needs, you can structure a policy that’s both affordable and tailored to your needs.
At Morgan Insurance Brokers, that’s exactly what we do. Whether you’re just starting out, self-employed, or looking to review an old policy, we’ll help you get the protection you need–without paying more than you need to.
Contact us today for more information on how we can help you.
The Top 5 Common Misconceptions About Income Protection Insurance
Income protection insurance, you’ve probably heard of it, maybe even considered it, but chances are, it’s still sitting in the “I’ll look into that later” pile. And honestly? That’s understandable. It’s one of those things people often don’t prioritise until life throws a curveball.
But the thing is, a lot of the hesitation around income protection stems from common myths, the kind that get passed around in casual conversations or buried in Reddit threads.
Hence, let’s unpack five of the biggest misconceptions holding people back from getting the cover they might actually need.
Misconception #1: It Only Covers Serious Accidents
One of the most persistent myths is that income protection is just for freak accidents, i.e. car crashes, falling off a roof, major trauma. And while it does cover serious accidents, it's important to note that– that’s just a slice of the picture.
What many don’t realise is that most income protection claims are actually due to illness such as cancer, chronic fatigue, back pain, long-term Covid complications, and even stress and burnout. If you’re too unwell to work (mentally or physically) and you meet the policy’s conditions, income protection steps in.
Misconception #2: It’s Too Expensive for What You Get
Lots of people assume income protection is only for high earners. But here's the thing: the pricing is actually quite flexible, and policies can be tailored to your budget.
The key factors that affect your premium? Age, occupation, smoking status, waiting period, and benefit duration. Want to lower your premium? Opt for a longer waiting period or a shorter benefit period.
And when you stack it up against losing your income for months (or longer), the value becomes pretty obvious. Even a modest payout, say 70% of your income, can help cover rent, groceries, school fees, or mortgage repayments when you’re off work.
Also worth noting? Income protection premiums are often tax-deductible, depending on how the policy is structured. That alone can make the cost much more manageable.
Misconception #3: Workers’ Compensation or Sick Leave is Enough
We get it, it’s easy to assume that your employer or the government has you covered. And to some extent, they do. But it’s rarely enough to cover long-term leave.
Workers’ compensation only kicks in if your injury or illness is directly related to your job, and even then, it can be limited. Sick leave, meanwhile, is often capped at a few weeks. It’s great for short-term recovery, but what if you're unable to work for longer?
Income protection fills that gap. It’s not about replacing what you already have, it’s about complementing it.
Misconception #4: It Won’t Cover Mental Health Conditions
Mental health issues are one of the leading causes of workplace absence in Australia, and many insurers have responded by expanding their cover accordingly.
Today, most modern income protection policies do include mental health, provided it’s diagnosed and documented by a professional. That said, not all policies are created equal, and some may include mental health exclusions or stricter waiting periods.
What’s important here is clarity. If mental health cover matters to you (and honestly, it should), check the fine print or speak to an insurance broker. Better yet, disclose any relevant history upfront, that way, you know exactly what you’re covered for.
Misconception #5: “I Don’t Need It, I’m Young & Healthy”
When you’re young, you’re statistically less likely to claim, which means your premiums are lower and your cover options are wider. You’re also more likely to be approved without exclusions or loadings (higher costs) for pre-existing conditions.
Income protection is like an umbrella. The time to get one isn’t when it’s already raining. It’s while the sun’s still out.
Get Insured Today– Before Life Happens
No one likes to think about being unable to work. But for many Australians, it often happens unexpectedly. And when it does, it’s good to have income protection insurance. It’s essentially the difference between financial freefall and stability.
So, if you’ve been putting it off, maybe because of one of the myths above, now is a good time to rethink things. Talk to an expert, ask the right questions, and most importantly, read the fine print.
If you need assistance obtaining income protection insurance or have questions about the details, contact us to speak with one of our experienced brokers.
How Much Income Protection Insurance Do You Really Need?
Here’s the truth: there’s no neat, one-size-fits-all number when it comes to income protection insurance–and any broker that tells you otherwise is probably more interested in a quick policy sale than actually protecting your livelihood.
So, let’s break it down properly.
First, What is Income Protection Actually For?
Income protection insurance steps in when you can’t. It’s specifically designed to replace a portion of your income if you’re unable to work due to illness or injury, up to 70% of your regular pay. It’s not designed to make you rich, but what it does do is give you breathing room–enough to keep the lights on, the rent/mortgage paid, and food on the table while you prioritise getting back on your feet.
But how much do you really need? That’s where it gets personal.
Start With Your Monthly Essentials
This is exactly where most people underestimate things. Income protection isn’t just about covering your lost salary, it’s about helping you manage your basic needs, such as:
- Rent or mortgage payments
- Groceries
- Utility bills
- Petrol or public transport
- Phone and internet bills
- Kid’s school fees (if that applies to you)
- Debt repayments (credit cards, loans, etc).
Now, add a bit of buffer room. You might be spending more at home if you’re recovering, i.e. extra heating, takeaway meals, medical appointments. Likewise, don’t forget to take into account private health insurance premiums if you’re paying them out of pocket.
Tally that all up. The sum is the bare minimum you need your income protection policy to cover each month.
Now Consider Your Lifestyle
Not everything you budget for is essential, but it still matters. Most people don’t want to downgrade their lifestyle while recovering, and frankly that’s fair enough. You’re already off work, dealing with doctors, and stuck at home. You don’t want to also cancel your monthly subscriptions, give up your streaming services, or feel like you’re losing more than you already have.
We’re not suggesting that you be able to cover every last luxury,but aim for enough coverage that you can maintain a sense of normalcy in your life. If the ultimate goal is to recover and return to work, keeping some semblance of your usual life makes that transition much easier, both mentally and emotionally.
What’s Your Current Income?
Income protection is usually capped at a percentage of your pre-tax income, oftentimes at 70% or less. Some policies might offer more, particularly if they include super contributions.
For instance, if you’re earning $6000 per month before tax, your monthly benefit might max out at $4200. That’s what you’ve got to work with. Now compare that against your monthly expenses and lifestyle costs? Is it enough?
If not, you might want to look at additional policies, trauma insurance, or even consider topping up with savings or a rainy-day fund.
Consider the Waiting Period
The waiting period is how long you’ll need to wait before your policy starts paying out. Common waiting periods tend to be 30, 60, or 90 days long.
The longer the wait, the cheaper the premium. But the real question is: how long can you realistically go for without an income?
If you’ve got a decent amount of sick or annual leave built up, you might be able to get away with a longer waiting period, but if you’re self-employed, casual, or don’t have that safety net, you’ll want a shorter waiting period, even if it might cost more.
How Long Should It Pay Out For?
This represents your benefit period. Some policies pay out for a maximum of two years, while others may cover you till you’re 65. The longer the benefit period, the higher the premium, but again, it depends on your job, health, and financial plan.
For instance, if you’re in a trade or physically demanding role, and an injury could take you out long-term, a two-year policy probably won’t cut it. Likewise, if you’re still early in your career and building up assets, you might want the reassurance of longer cover.
Don’t Just Pick a Policy and Forget It
Your income protection needs aren’t static. Got a pay rise? Had a kid? Maybe you bought a house? Your policy should change with your life. A lot of people set up their income protections when they first get a job, and then never look at it again.
You should at least be reviewing your cover every couple of years, or any time there’s a major life change. Otherwise, you might find yourself uninsured just when you need it most.
So, How Much Do You Really Need?
At the very least, enough to cover your core monthly expenses–rent, mortgage, food, utilities, and/or debt repayments. That’s a non-negotiable. From there on, it depends on how much of your lifestyle you want to protect and how long you could survive for without a stable/regular income.
The good news? You don’t have to figure this out all alone.
At Morgan Insurance Brokers, we’ve helped tradies, business owners, freelancers, and families all across Australia get the right income protection insurance policy for their needs. We’ll work closely with you to tailor a policy that’s grounded in your real-life numbers, not just what some insurers form says you might need.
Whether you’re just starting out or reassessing after years on the same policy, we’ll help match you with the right cover, one that helps you maintain as much normalcy as possible when life throws you a curveball.
Contact us today for more information on how we can help you.
Can Income Protection Insurance Be Used for Mental Health Conditions?
If you’ve ever needed time off work for anxiety, depression, burnout or another psychological condition, you’ll know the impact it can have, not just on your wellbeing, but on your income. It’s a growing concern too. More Australians are taking leave due to mental health issues than ever before, and for some, that’s where income protection insurance steps in.
But can it actually cover time off due to mental illness? The short answer is yes, though it depends on your policy, the severity of your condition, and how your insurer assesses your claim. It’s not always straightforward, but it’s worth understanding your options.
For more information on income protection insurance, read this.
Types of Mental Health Conditions Commonly Covered
According to a National Study of Mental Health and Wellbeing, approximately 42.9% of Australians aged 16-85 have experienced a mental disorder at some point in their lives. In fact, mental health conditions have emerged as the leading cause of income protection and total and permanent disability (TPD) claims for several years.
This alone underscores the significant impact of mental health conditions on the Australian workforce and the importance of income protection insurance in providing financial support during periods when individuals are unable to work due to mental health issues.
While income protection insurance is typically associated with physical injuries or illnesses, most comprehensive policies also cover a range of mental health conditions. This typically includes:
- Depression, one of the most common claims, especially when severe and diagnosed by a medical professional.
- Anxiety disorders, generalised anxiety, panic disorders, and social anxiety may be covered if symptoms significantly impair your ability to work.
- Post-Traumatic Stress Disorder (PTSD), often linked to trauma, including workplace incidents, and must be diagnosed by a psychiatrist or psychologist.
- Bipolar disorder, this tends to involve stricter conditions and more frequent reviews, but is often eligible under long-term claims.
- Adjustment disorder and burnout, while harder to prove, these are increasingly recognised as valid causes for extended sick leave.
Not every policy covers all of the above, and some may include mental health exclusions unless disclosed during the application. The key is transparency: if you’re upfront with your medical history when applying, you’re more likely to be covered down the line.
Policy Terms to Be Aware of
This is where things get a bit nuanced. Just because a policy can cover mental health doesn’t mean it will, or that it will do so without a few caveats. Here are a few things to watch for:
- Exclusions, some insurers still include general exclusions for mental health conditions. Others might exclude pre-existing conditions, especially if you’ve had treatment within a certain timeframe before taking out the policy.
- Waiting periods, most policies have a waiting period. This means you won’t receive payments immediately after taking leave, you’ll need to be off work for the entire waiting period first.
- Benefit periods, depending on your policy, you might be entitled to income support for two years, five years, or until a certain age. Long-term claims for mental health can be reviewed more rigorously than physical ones.
- Partial disability claims, if you can return to work in a reduced capacity, say, part-time or in a different role, you may be eligible for partial benefits, depending on your policy’s structure.
- Medical evidence, mental health claims almost always require supporting evidence from specialists. Regular GP notes may not be enough.
3 Steps to Claiming Income Protection Insurance for Mental Health Conditions
So how does one actually go about making a claim?
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- First, before approaching your insurer, consider speaking to your GP or a mental health professional first. It’s mandatory to have an official diagnosis and clear recommendation that you’re unfit to safely perform your job duties. This documentation then becomes the foundation of your claim.
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- Next, notify your insurance provider that you now intend to file a claim. They’ll provide you with a form that will outline what’s needed, typically including:
- The initial GP report
- A certified copy of your identification
- The policy schedule
- All standard claim forms and other relevant documentation or reports.
- Next, notify your insurance provider that you now intend to file a claim. They’ll provide you with a form that will outline what’s needed, typically including:
- Last but not least is the assessment and decision process. This can take some time as the insurance company will meticulously assess your claim based on the severity of your condition. IF approved, you’ll then begin receiving payments (after the waiting period ends) to help cover your income while you recover.
Pro Tip: Keep detailed records, everything from appointment notes to communications with your insurer. It’ll make a huge difference if a dispute arises.
Choosing the Right Policy
It’s definitely tempting to omit certain parts of your mental health history to secure lower premiums. But remember, this can backfire if and when you need to make a claim. A good insurance broker can help you find cover that doesn't penalise you for being upfront.
Get in touch today to find out how we can support you.
How Income Protection Insurance Can Help You Maintain Your Income While Recovering
Income protection insurance is the financial lifeline you don’t realise you need until the unexpected happens.
It’s a common misconception that income protection insurance is only for the wealthy. In reality, the opposite is true. If you rely on your income to cover mortgage repayments, household expenses, and daily living costs, have you considered how you’d manage financially if that income suddenly stopped?
Whether it's due to illness or injury, income protection insurance helps ensure you can keep up with your financial commitments while you focus on recovery.
At Morgan Insurance Brokers, our experienced team of brokers can help you find the right cover to suit your needs. Reach out today to protect your income and your peace of mind.
The Basics of Income Protection Insurance
Whether you have income protection insurance through your super, an employer, or private insurer, it’s important to understand exactly how the coverage works. Key considerations include:
Waiting Period
The waiting period for the insurance claim represents the minimum amount of time you need to be unable to work before you can begin receiving benefit payments. In most cases, this ranges from two weeks to three months.
With some policies, you may be able to customise your waiting period. Generally, the longer the waiting period, the more affordable the policy. When deciding on a waiting period, it’s important to consider how much sick leave, annual leave, and emergency savings you currently have available.
Benefit Period
The benefit period refers to how long the monthly payments will continue if you remain unable to work due to illness or injury. Most income protection policies offer benefit periods ranging up to five years or to a specific age.
It is important to note that while a longer benefit period typically results in a more expensive policy, it also provides a longer and greater level of protection during your time away from work.
Type of Premiums
The type of premiums you choose, whether stepped or level also impacts the cost of your policy. Stepped premiums are generally recalculated at each renewal, meaning the cost may increase as you age due to a higher likelihood of claiming.
In contrast, level premiums are typically more expensive at the start of your policy. However, the cost does not increase based on your age, so premium rises tend to happen more slowly over time.
Payout Amount
In Australia, most income protection insurance policies offer up to 75% of pre-tax income. Some may also include an additional 10–15% to cover superannuation contributions.
Maximum monthly payments vary by provider, with some specialised policies offering up to $30,000 per month.
Benefits of Income Protection Insurance While Recovering
Designed to replace a portion of your income, income protection insurance ensures you continue receiving a steady monthly payment to support your lifestyle while recovering from an injury or illness. Key benefits of income protection insurance include:
A continuous stream of income even if you can’t work
While you may have savings, a prolonged period of not being able to work can quickly deplete them. During such times, income protection insurance provides you with adequate financial support, helping you manage ongoing expenses without having to exhaust your existing savings.
Income protection protection insurance can be customised
Depending on your provider, your policy can be tailored to suit your individual needs and preferences. This includes adjusting elements such as the waiting period, benefit period, and premium structure. For example, you could choose a longer benefit period with lower monthly premiums, or opt for a shorter waiting period with higher premiums.
Income protection insurance may be tax deductible
In many cases, the premiums you pay for income protection insurance are tax-deductible, making it a more cost-effective option. This generally applies when the policy is held outside of your superannuation. It is important to confirm your eligibility with the ATO or a qualified tax professional. Alternatively, by working with a broker, you can receive tailored advice to help guide your decision.
Get Income Protection Insurance While You're Young
A core component of any financial plan, income protection insurance helps safeguard you if the worst were to happen. The team of brokers at Morgan Insurance Brokers can guide you in securing the best policy for your needs, offering much needed peace of mind during challenging times.
If you need help obtaining income protection insurance or are unsure about specific details, contact us to speak with one of our experienced brokers.
How to Increase Your Life Insurance
Is It Time to Boost Your Life Insurance Cover in 2025?
Life insurance isn’t just a policy, it’s peace of mind. It’s about knowing that, if life takes an unexpected turn, your family’s financial future is protected.
In 2025, the insurance landscape in Australia continues to evolve, with changing regulations, smarter technology, and rising expectations from customers. The good news? It’s never been easier to review and increase your life insurance coverage.
Start with What You Have
Take a good look at your current policy. How much are you covered for? What’s the premium, and are there any exclusions? Big life changes such as getting married, starting a family, buying a home, or starting a business are all signs that your current cover might need an update. It’s a smart habit to review your policy each year or after any major event.
Work Out What You Really Need
Your life insurance cover should reflect the real financial footprint you leave behind. It's not just about a lump sum, it’s about preserving your family’s future and lifestyle when you’re no longer here to protect them.
Here’s how to think about it in a broader, more personal way:
Clear the Big Debts
Start with the obvious: your mortgage. If your home loan isn’t paid out, could your partner or family afford the repayments alone? Include:
- Home mortgages or investment property loans
- Personal loans and car finance
- Outstanding credit card balances
Protect Your Family’s Lifestyle
Imagine life continuing for your family without your income. Think about:
- Replacing your annual income for 5–10 years (or until your youngest child is financially independent)
- Household bills like utilities, groceries, fuel, insurance, maintenance
- Childcare and family support services if your partner needs to work more or manage on their own
Fund Future Milestones
Think long-term. Will your kids want to go to university? Will there be wedding expenses one day?
- Primary and secondary school fees
- University tuition or trades/TAFE training
- Extracurricular activities like sports, dance, or music
Cover Immediate Expenses
Final costs can be a financial shock. Planning ahead eases the burden during a difficult time:
- Funeral and burial or cremation costs
- Legal and estate administration fees
- Any unpaid medical or end-of-life care expenses
Factor in Inflation & Life's Curveballs
The dollar you insure today won’t stretch as far in 10 or 20 years. Make sure your cover keeps pace with:
- Rising living costs
- Unexpected events or emergencies (e.g. home repairs, medical needs)
- Economic conditions that could impact your family’s financial plan
Chat With an Expert Broker (Like Morgan Insurance Advisors)
Navigating life insurance alone can feel like reading a foreign language. That’s where a trusted adviser becomes more than just helpful, they become essential.
At Morgan Insurance Advisors, we’re not tied to any one insurer. We work for you. That means you get access to the best products across a range of reputable providers, and tailored advice based on your actual needs, not sales quotas.Here’s how working with us gives you the edge:
Top Up Your Existing Cover
- We help assess whether your current policy still fits your life today and what might be missing.
- If your needs have grown, we can explore increasing your sum insured without requiring a brand-new policy or medical underwriting, depending on the insurer.
Add Extra Layers of Protection
Life isn’t one-size-fits-all, and your cover shouldn’t be either.
We can advise on adding additional covers like:
- Total and Permanent Disability (TPD): Pays a lump sum if you become permanently disabled
- Trauma (Critical Illness) Cover: Supports you through serious medical conditions like cancer or heart attack
- Income Protection: Replaces a portion of your income if you're unable to work due to illness or injury
Upgrade or Restructure Your Policy
If your current policy is outdated or lacks flexibility, we’ll help you switch to something more suitable, without overpaying or compromising on protection. We can even implement more tax-effective solutions by funding your life insurance through superannuation, when appropriate.
Dedicated Support, Not Just During the Sale
We’re with you for the long run. Need help with a claim? Got questions after the fact? We’ll be your advocate, every step of the way. Our advisers speak in plain English. No jargon. No pressure. Just honest, strategic guidance.
Tailored Advice That Reflects Your Life
Whether you're a new parent, a business owner, self-employed, or looking to protect aging parents, our team tailors your cover to suit your financial and personal goals
Check Out What’s Out There
Comparing policies is quicker and easier than ever. Use a trusted broker like Morgan Insurance Advisors to see how your policy stacks up. Things to watch for:
- Value for money on premiums
- Flexible options to suit your life stage
- Reliable, supportive claims handling
Consider Your Super
At Morgan Insurance Brokers we can implement your insurance policy to be funded from your existing superannuation policy. If you have life insurance through your superannuation fund, we can review your if you have default cover and instead implement an underwritten contract of insurance so there are no surprises at claim time. An underwritten retail contract will also provide additional features such as the ability to include a 'life buy back' option following a TPD claim or an 'Own' occupation TPD definition.
Keep Your Finger on the Pulse
Understanding what’s changing in the life insurance space means you can make smarter decisions. Let us help you assess whether your cover—both inside and outside super—is doing the job you need it to.
Your life doesn’t stay the sam, neither should your insurance. Whether it’s updating your cover, exploring more cost-effective options, or understanding what’s possible through your super, a quick review today could make a big difference tomorrow.
Want help with your review or quote? Let’s talk.
What are the 3 main types of life insurance?
Life insurance is a crucial component of financial planning, providing peace of mind and financial security for you and your loved ones. In Australia, there are three main types of life insurance: Term Life Insurance, Whole of Life Insurance, and Life Insurance via Superannuation.
Each type has its unique features, benefits, and considerations. In this blog, we will explore these three types in detail to help you make an informed decision about which one is best suited for your needs.
Term Life Insurance
What is Term Life Insurance?
Term life insurance is the most common type of life insurance available in Australia today. It provides coverage for a specified period, known as the "term." If the policyholder passes away during this term, a lump sum benefit is paid to the beneficiaries. This type of insurance is designed to provide financial protection for your loved ones in the event of your untimely death.
Key Features of Term Life Insurance
- Coverage Period: Term life insurance covers you for a set number of years or until you reach a certain age, whichever comes first. Common terms range from 5 to 15 years.
- Premiums: Premiums are generally level (fixed) during the term of the life cover.
- Flexibility: Many term life insurance policies offer the flexibility to adjust your coverage amount as your needs change. You can increase or decrease your coverage, subject to underwriting requirements.
- Renew-ability: Some term life policies are renewable, allowing you to extend your coverage without undergoing a new medical examination, although premiums may increase.
Benefits of Term Life Insurance
- Affordability: Term life insurance is more expensive initially than a policy with a 'stepped' premium under a 'whole of life' policy.
- Simplicity: The straightforward nature of term life insurance makes it easy to understand and manage.
- Financial Security: Provides a lump sum benefit to your beneficiaries, helping them cover expenses such as mortgage payments, education costs, and daily living expenses.
Considerations for Term Life Insurance:
- No Cash Value: Term life insurance does not accumulate cash value. If you outlive the term, the policy expires without any payout.
- Fixed Increases: Term life is offered under a 'fixed' premium - although there may still be some increases to the premiums whilst the policy is in place.
Whole of Life Insurance
What is Whole of Life Insurance?
Whole of life insurance, also known as permanent life insurance, provides coverage for the entire lifetime of the policyholder. Unlike term life insurance, whole of life insurance includes an investment component, which allows the policy to build cash value over time. However, it's important to note that whole of life insurance is no longer available for new policies in Australia. It was phased out in the early 1990s, but existing policies remain in force.
Key Features of Whole of Life Insurance
- Lifetime Coverage: Whole of life insurance covers you for your entire life, as long as premiums are paid.
- Guaranteed Death Benefit: A lump sum benefit is guaranteed to be paid to your beneficiaries upon your death as long as the policy is held in-force.
- Level Premiums: Premiums typically remain level throughout the life of the policy, providing predictability in your financial planning however increases to premiums still occur. Long term there may be significant savings from implementing a 'level' premium policy. Generally a younger a client is when they implement a 'level' policy the greater the long term savings.
Benefits of Whole of Life Insurance
- Permanent Coverage: Provides lifelong protection, ensuring your beneficiaries receive a payout if you pass away and the policy if in-force.
- Stable Premiums: Level premiums provide consistency and predictability in your budgeting.
Considerations for Whole of Life Insurance
- Higher Premiums: Whole of life insurance premiums are generally higher under a 'level' premium than term life insurance premiums due to the lifelong coverage. In contrast, Whole of life insurance premiums are generally lower initially under a 'stepped' premium than term life insurance premiums however may become more expensive as the premiums increase with age.
Life Insurance via Superannuation
What is Life Insurance via Superannuation?
Life insurance via superannuation is a type of life insurance that is offered through your superannuation fund. Superannuation is a retirement savings system in Australia, and many super funds include life insurance as part of their offerings. This type of insurance typically includes life cover (death benefit), total and permanent disability (TPD) cover, and income protection cover.
Key Features of Life Insurance via Superannuation
- Automatic Coverage: Many super funds automatically provide a default level of life insurance coverage when you join the fund. You can usually adjust the level of cover to suit your needs however the additional cover will require a full application with underwriting.
- Premiums Paid from Super Balance: Premiums for life insurance via superannuation are deducted from your superannuation account balance, rather than your take-home pay.
- Tax Advantages: Premiums paid from your superannuation account may have tax advantages, as they are generally paid from pre-tax contributions and tax deductible to your super fund.
- Beneficiary Nomination: You can nominate beneficiaries to receive the death benefit from your superannuation account.
Benefits of Life Insurance via Superannuation:
- Convenience: Automatic coverage and premiums deducted from your super balance make it easy to manage.
- Cost-Effective: Group insurance policies offered through super funds can be more cost-effective than individual policies.
- Tax Benefits: Potential tax advantages can make this type of insurance more affordable.
Considerations for Life Insurance via Superannuation
- Limited Coverage: Default coverage levels may be insufficient for your needs, requiring you to adjust the cover amount.
- Impact on Retirement Savings: Premiums deducted from your super balance reduce the amount available for your retirement savings.
- Complex Claims Process: The claims process for life insurance via superannuation can be more complex and time-consuming compared to individual policies or an underwritten policy.
Conclusion
Choosing the right type of life insurance is a critical decision that depends on your individual circumstances, financial goals, and preferences. Term life insurance offers affordable and straightforward coverage for a specified period, making it suitable for those seeking temporary protection. Whole of life insurance provides lifelong coverage, offering stability. Life insurance via superannuation offers convenience and potential tax benefits, but it may require adjustments to ensure adequate coverage.
Why Choose Morgan Insurance Advisors for Your Life Insurance Needs
At Morgan Insurance Advisors, we bring a wealth of specialised knowledge in the life insurance market. Our team of experienced advisors provides expert guidance tailored to your unique needs, ensuring you make informed decisions about your life insurance options.
We take the time to understand your individual financial situation and goals. By offering customised solutions, we ensure that your life insurance policy aligns perfectly with your needs and provides the best possible protection for you and your loved ones.
Our extensive network of insurance providers allows us to offer a variety of life insurance products. This means you have access to the best options and can choose the policy that suits you best.
Thanks to our strong relationships with insurance providers, we can often secure more favourable terms and rates than you might achieve on your own. Our negotiation skills ensure you get the best value for your policy.
Our commitment to you doesn't end once your policy is in place. We provide continuous support and advice, helping you manage your life insurance effectively over time. Whether you need to update your policy or have questions about your coverage, we're here to assist you every step of the way. Contact us today.
How to Protect Your Personal Assets as a Sole Trader
Oh no…your business is being sued. You’ve hit a rough patch and now you’re facing a lawsuit. As a sole trader, the stakes are incredibly high. You stand losing your personal savings, home, and ultimately your business. However, it doesn’t have to lead to that. With the right strategies in place, you can actually safeguard your business and hard-earned money. Here’s how you can do so– way before the unexpected happens.
5 Strategies to Protect Your Personal Assets
To preface, when you’re operating as a sole trader, your personal and business assets are not separate. This means you stand losing everything to your name if you’re facing a lawsuit.
Hence, a well structured asset protection strategy will help keep your personal assets free from risk if your business is being sued. It’s not a complicated process– here are five key strategies you can undertake.
- First, obtain relevant insurance coverage to your business operations. All businesses should have public and product liability insurance. These policies will safeguard you against financial losses as a result of lawsuits.
- Second, as sole trader you’re susceptible to liability due to the inherent structure of your business. So, a good rule of thumb would be to consider transitioning to a more protective business structure. For example, a company or a trust. They offer a higher degree of asset protection by separating your business from your personal assets.
- Third, consider shifting ownership of your personal assets to a trusted family member or anyone not directly involved in your business. This protects your business from general creditors if your business is sued. If a spouse or family member owns valuable assets used in your business, it’s important to register them on the Personal Property Securities Register (PPSR) to clarify ownership.
- Fourth, be sure to maintain clear and accurate financial records. This includes detailed records of all business transactions such as– expenses, personal and employee income, asset ownership, and more. In the unlikely event your business is sued, this documentation will help you demonstrate a clear separation of your personal and business assets.
- Fifth, always make sure to seek professional advice. A lawyer and/or an accountant with experience in asset protection will help you assess risks and develop appropriate mitigation strategies. Likewise, remember to stay informed about changes in specific laws and regulations. Regularly review and update your strategies to ensure compliance.
Is it Actually Possible to Completely Protect Your Personal Assets?
There is no black and white answer. While a multitude of strategies exist to protect personal assets as a sole trader, achieving complete protection is highly unlikely. There are several reasons as to why this is challenging.
- Sometimes, regardless of your business structure, creditors may require personal guarantees. These guarantees will expose your personal assets to risk.
- Unforeseen circumstances– like a pandemic or a sudden shift in legislation can create liabilities for you. Hence, as a sole trader, conduct due diligence by staying ahead of the changing regulatory requirements.
- Asset protection strategies are highly complex. One missed documentation can undermine its effectiveness.
- Under certain circumstances– like fraud or negligence, courts can still hold sole traders personal assets liable for business debts.
Need Help? Reach Out to Us
We’ve outlined a number of clear strategies you should consider implementing as a sole trader. As a sole trader, insurance policies you should consider include:
- Public Liability Insurance
- Workers Compensation Insurance
- Motor Vehicle Insurance
- Personal Accident/Income Protection Insurance
- Professional Indemnity Insurance
- Cyber Insurance
In the event you find yourself facing a lawsuit, reach out to your insurance broker immediately. First, your insurance broker will advocate for you; and second, it’ll ensure that your insurer extends indemnity. Moreover, they can also guide you through completing your claim promptly.
In specific circumstances, consulting with qualified professionals including lawyers, accountants, and your insurance broker will help you determine the best asset protection strategies for yourself.
At Morgan Insurance Brokers, our skilled team specialises in insurance policies for small to medium businesses. We’ll conduct extensive research into your business and guide you towards selecting the best insurance policies for yourself.
We understand that there is no one size fits all strategy when it comes to personal asset protection. However, with years of experience and over 150 insurers under our belt, we know how to help you minimise your risk.
Ready to partner with us? Contact us today for a free consultation. Let us help you determine the best ways to safeguard yourself.
Should You Insure Inside or Outside Your Superannuation?
Should You Insure Inside or Outside Your Superannuation?
Life is unpredictable. Unexpected events can have significant financial consequences for both you and your family. This is why insurance is such an important thing to consider. The chances are high that you are already insured. Most superannuation funds automatically sign their clients into insurance policies, with as many as 10 million working Australians having insurance through their superannuation funds.
When deciding which insurance policy works best for you, you should consider important things like a family dependant, debts you may have, and your current lifestyle. Insuring inside your super fund or with individual retail insurers via your super offers a range of benefits and disadvantages and should be carefully considered.
Get a QuoteWhat types of insurance do superannuation funds offer?
There are three kinds of insurance policies offered through your super funds:
- Life (or death) insurance: Beneficiaries receive a lump sum payment if you die.
- Income protection: In case of temporary illness or disability, this ensures you receive income over a specified period of time.
- Total and permanent disability (TPD) insurance: if you are unable to work again due to a serious disability, you may receive a lump sum payment.
There are only a few reasons why you may not automatically have insurance coverage through your superannuation. This can be because:
- You are under 25 (unless working in a dangerous job or made a voluntary choice to opt-out of insurance coverage).
- You have less than $6,000 in your superannuation account or your account was inactive and your insurance was cancelled.
Once these thresholds have been met, your superannuation account will automatically apply or offer you insurance coverage. You can check if you have insurance through your super account, your annual superannuation statement, or by contacting your superannuation fund directly.
Why not insure through your superannuation?
There are benefits to funding your insurance via your superannuation, such as:
- Superannuation funds may have lower premiums because of their access to group policies, making them cost-efficient.
- Contributions to your super fund are taxed at a lower threshold of 15%, meaning your paying for insurance with pre-tax or tax efficient super assets.
- Paying insurance premiums through your superannuation means better cash flow management and no out-of-pocket expenses from your disposable income.
- Default insurance policies almost always come with automatic acceptance, so there is rarely ever a need to get a medical check or answer health questions to secure coverage; this can be advantageous to some clients.
Default insurance cover via superannuation.
Though these benefits may seem good to most people, and incredibly convenient, there are a much longer list of disadvantages to insuring inside your super fund:
- Lack of customisation for default insurance benefits: There is much less customisation for your default insurance coverage because the policies are generalised to suit a variety of people. This means that more specialised retail insurance coverage that might benefit you more is unavailable to you.
- Default Insurance premiums aren’t always cheaper: While some default super fund insurance policies might be less expensive, there may be things that affect your premiums that are outside of your control. This is often because super funds have bulk rates through their insurers, or there is an increase in the number of claims being lodged. For example, young members and non-smokers end up with steeper premiums because of the increase in claims from smokers and elderly people.
- Life insurance benefits expire quicker inside super funds: Generally, default Life insurance policies within your super reduce automatically as you get older and expire once you reach the age of 65-70. In comparison, retail cover can continue to age 99.
Why You Should Insure with Retail Insurance
- Retail insurance can be funded from your Super also: As with default insurance any new retail insurance can be funded from your current super policy. There is no requirement to change super funds. The premiums are funded as an annual rollover from your super to your insurance policy.
- More coverage options for flexibility and customisation: When insuring with a retail insurance provider, your policies become much more customisable. With individual insurance policies can come additional coverages like trauma cover, reduced waiting period for benefits payments, and Own occupation disability cover.
- Retail insurance policies are renewable: Default insurance contract terms are constantly renegotiated between the insurer and the superannuation provider, which can reduce your benefits. In comparison, retail insurers will never downgrade your benefits once your policy is in place and you have an enforceable contract in place between you and the retail insurer. For example, while your default insurance in your super fund might reduce your insurance benefits as you age, your retail insurance policy will always remain the same until you request to reduce or cancel your cover.
Insure With Morgan Insurance Brokers
If you are thinking of moving away from your super fund default insurance provider, we can help.
At Morgan Insurance Brokers, we know insurance like the back of our hands. After a free, no-strings consultation, we work with you to create the best insurance coverage for your situation and lifestyle.
Contact us today and start your insurance journey the right way!
Get a Quote
Disadvantages of Default Life Insurance Through Superannuation
Did you know that you might be automatically insured through your superannuation fund? Whether you realise it or not, some super funds are required to sign you up for insurance, even going so far as to take money out of your super fund to pay for it. In 2021, ASIC estimated there were almost 10 million superannuation accounts with insurance included.
While there are some benefits to insuring through super – no requirement to complete an application– this doesn’t mean it is a good thing. In fact, there are quite a few disadvantages to having default insurance through your superannuation fund, and the best thing is that it is not compulsory! You can cancel your deafult super fund insurance anytime.
What insurance can you get through superannuation?
There are typically three kinds of insurance offered through your super. These are:
- Life (or death) insurance: This provides beneficiaries with a lump sum payment in case of death.
- Income protection: This provides a source of income if you are unable to work due to temporary illness or injury.
- Total and permanent disability (TPD) insurance: This provides a lump sum payment if you become seriously disabled and are unable to work again.
How do you know if you are insured through your superannuation?
There are generally a few guidelines surrounding your superannuation insurance. If you are under 25 and have less than $6,000 in your superannuation account, you won’t be automatically covered by insurance unless you work in a dangerous job or decide to opt-in for it. Once you have met these criteria and receive employer contributions, you are likely insured.
If you aren’t sure whether or not you are insured through your super fund, there will be proof of insurance through your super fund’s annual statement. Alternatively, there will be information about your insurance through your super account. If you still can’t find it, give your super fund a call and ask directly.
What are the disadvantages of default life insurance through superannuation?
- Default life insurance is usually inadequate for most people
APRA/ASIC came out with claims statistics in 2023 that proved just how different the coverage is for insurance inside and outside of super. The average claim for life insurance policies outside of super was $509,000 compared to super fund insurance policy payouts, which sat at around $135,000. This shows just how drastically different insurance policies inside and outside super funds are.
On top of that, some super fund insurance policies have a fixed premium but the amount you are insured for changes. As you age and the likelihood of making a claim increases, your super funds insurance policy lets you down right when you need it by reducing the amount of money you can claim.
When you have an underwritten retail insurance contract, your cover will not be reduced unless you specifically request this. Some policies also offer the option to increase your level of cover without needing medical checks.
- Claims payments made through super funds can be much slower
When insured through super default the claims process is usually slower when compared to a retail policy. If you have not nominated a valid beneficiary for your Life insurance, the insurer pays the trustee of your super account, and they may be left with whom your insurance will be paid to. Regarding ‘Total and Permanent Disability Cover’ and ‘Income Protection’ The trustee is left to decide if the ‘Super conditions of release’ have been met before a successful claim is paid.
- Tax may be payable on insurance benefits under super funds
A payment from an insurer outside of a super fund is usually 100% tax free. This is not always the case for insurance inside super funds depending on whether Life insurance is paid to a valid tax dependant beneficiary – for example a child under 18, a spouse or a person with which the life insured has an interdependency relationship.
Taxing your life insurance benefits largely depends on who is receiving the payment. If the beneficiary is not considered to be financially dependent (i.e. a non-dependent child aged over 18 or other non-financially dependent persons), they could pay as much as 32% in tax for the taxable component.
Tax may be applied on ‘Total and Permanent Disability’ proceeds if the proceeds are withdrawn from super before retirement age or age 60 years. Below that age of 60 the tax payable is determined by your super eligible service date. Tax of up to 22% may be payable including a portion which will be tax free.
- Insurance premiums get taken directly from your retirement balances
Arguably the most important point to make is that your insurance premiums get taken directly from your retirement funds when you insure through your super account.
While it may be appealing and convenient to pay through your super so you don’t lose any money out-of-pocket, you may consider making additional contributions to your super to boost your super and replace any additional insurance premiums.
Still Unsure? We Can Help
Are you unsure about keeping your default insurance with your superannuation?
When you insure through Morgan Insurance Brokers, we make sure you get the best life insurance for you. We have a discussion where we learn about your needs and then develop a tailor-made plan with comprehensive coverage at the most competitive premiums.
Contact us for a free, no-strings consultation and safeguard your future.
