It seems that people who are healthy are more likely to have higher incomes and better job prospects, according to a report.
The AMP.NATSEM report “Healthy, Wealthy and Wise?” found people who were unhealthy earned less than half of the average income of healthy people. The unhealthy also had poor participation in the workforce, with one in every two unhealthy working-age people not working, compared to one in five working-aged people who had good health. So, it definitely shows that being healthy will increase your overall lifestyle.

Surprisingly, unhealthy workers were more likely to be in casual work rather than full-time positions, meaning most lost access to the sick pay benefits that full-time workers had. These are also the people who would probably need it most aswell.

The average income of healthy people rose from $41,000 in 2001/02 to $54,000 in 2006/07 while those with “persistent poor health” found their incomes fell from $24,000 to $22,000 in the same period.

Investing time and effort in good health is worth the effort in terms of having a job and a good income. Staying fit and healthy generally requires strong discipline in terms of eating habits and exercise. Also applying that same discipline to money management will provide financial benefits down the track. It’s a ‘lifestyle’ decision.

Contrast to our physical health, being a ‘Fat’ nation, the report found Australians were in good financial shape, experiencing the fourth highest level of quality of life in the world, but many were unprepared for life-changing circumstances such as unexpected illness or injury.

Could you afford to pay the rent, a mortgage, personal loans, food bills or school fees with weeks or months without an income, or even with a reduced income if you couldn’t work? Many people would not.

A report by Dunn & Bradstreet found four out of 10 Australians, could only last for up to one month if they lost their job. This is concerning, considering that only 1 in 5 Australians have some form of income protection insurance in place to combat this. Premiums are affordable & tax deductible, so it’s not a large committment to protect yourself from the unknown.

A fact is that 1 in 3 people will have 3 months off in their working life. Would you be able to survive?

Some simple steps to safeguarding yourself if you got into this situation are:

*GETTING rid of debts in the right order, such as non-deductable debts and high interest bearing debts such as credit cards;

* MAKING sure all insurances, including income protection, were adequate and up-to-date; and

* NOT spending more than you earn.

For more information and quotes on Income Protection insurance, visit www.protectmywealth.com.au

PD

Considering it’s small business month, I thought it would be fitting to write some articles and resources on small business and some of the issues that are common place in SME’s.

I hope you enjoy it and if you have any suggestions about something you would like to find out more about, please feel free to comment or Email Me .

This series will cover things such as:

Leasing vs Buying computers & equipment

Avoiding expensive marketing mistakes

Finding New Staff

What insurance does your business need?

I lok forward to your feedback. For further advice, you can always call me on 1800 989 657.

Paul Davies

If you are at home between the hours of 9 and 4, and you are tuned in to any television channel imaginable, then chances are that you will come across a message from one of the televangelist informercials relating to life insurance who seem about as sincere as Brittney Spears marital vows.

These ads generally promote that you can get life insurance for as little as $4 a week or something similar. However, what they don’t tell you is that the policy you can receive with someone else is far superior and less expensive simply by calling a regular life insurance company or an adviser.

When calling in response to one of these infomercials, you are still required to give medical details, unless ou are after a Funeral Plan (whose premiums are almost DOUBLE that of normal policies for that value).

So, here are the three reasons to beware of television life insurance offers:

1) The premiums charged almost 40% higher than normal policies

2) There are many exclusions such as conditions you have suffered in the last 2 years.

3) No advice offered

So, if you do feel the urge to contact these insurers after watching one of their promotional spots on daytime television, be sure to check with your adviser or do some more research.

PD

Whole of Life, or Endowment policies, as they were known, used to be offered in Australia up until about 5 years ago when the previous government changed regulations pertaining to the taxation of these types of products.

The main tax concession available with these policies were If no withdrawals are made in the first ten years you do not have to pay income tax on the investment gains of the plan. If withdrawals are made during the 8th or 9th year a tax rebate may be available. But on a sliding scale.

If you currently hold an ‘Endowment’ or ‘Whole of Life’ policy, you may find some answers in this AMP Fact Sheet for their old funds. But still the fact remains that you can’t apply for new policies anymore. One main reason would be that fund managers weren’t making enough money on them either. Fancy that.

If you have a Whole of Life policy, you may want to consider talking to someone about whether it is still suitable for you or not. These policies have two parts to them.

1) A Life Insurance component - A premium is paid for a small amount of life insurance in the fund.

2) A savings component - Part of the money you put in goes towards the savings portion of your policy.

For example, if you pay $50 month toward your policy and possibly $30 of that will go to pay for the life insurance. In the beginning it may only have been $5 or $10, but as you get older, the premiums increase an that eats into the savings component of your fund.

This is why I get so many people asking me why they only have a small amount of money to cash in at the end of the policy when they’ve been paying into it for over 10 or 20 years. Sometimes, the best option is to look at premiums the other companies are offering, (who also have better benefits that the original policy you may have) and put the savings component into super, your mortgage, or even a savings account.

PD

We all know the importance on insurance and the implications of what would happen if something serious was to happen to our health and well being. But many of us dont have a revelation of what the actual impact of such a major trauma would be.

This video is a real life story of a successful chiropractor who’s working life was cut short due to a terrible incident. This proves that ‘you never know’.

Do you have a similar story to share?

PD

The two names generally mean the same thing, but when you are ’shopping around’ for insurance that will cover you if you are unable to work, you may be in for some surprises if you take the wrong one. I’ll outline as simple as possible the differences to save you the dramas at claim time.

There are two different industries: Life Insurance & General Insurance. The easiest way to differentiate them is that General Insurers (GI’s) usually offer home & contents or public liability in their range of products. This isn’t always the rule because some insurers sit on both sides of the fence, but you’ll get the jist as this post goes on.

An Income Protection (IP) policy is offered through a Life Insurer, and a Sickness & Accident (S&A) Insurer is offered by a General Insurer. S&A insurance a ‘yearly renewable’ cotract. This means that the insurer renews your policy on a yearly basis, as long as you still fall into their required guidelines. If not, they reserve the righ to cancel your policy.

An IP policy through a life insurer is a ‘guaranteed renewable’ contract, which means the insurer guarantees that they will reinsure you every year, as long as you keep paying the premium of course.

So, at face value based on this fact alone, it is more beneficial to take out an Income Protection policy instead of a Sickness & Accident policy. The other main concern when insured with a General Insurer through a S&A contract is that your premium is not guaranteed each year. Usually, your premium increases as you get older, due to statistics saying that you are more likely to have a claim. But a S&A policy will increase even further if the insurers pricing managers decide they need to cover their ‘rears’ a bit more this year. I’ve had people who have come to us after getting a 25% increase!

And lastly, at claim time, which is the all important reason you are taking this out in the first place, the S&A contracts state that you must be ‘unable to perform ALL of your income producing duties’ to make a claim. IP policies state mostly that you be ‘unable to perform ONE of your income producing duties’ to receive a full claim. And you can even go back to work part time and get some form of benefit form your policy.

Why would anyone get a S&A policy? Because they aren’t told at time of application. Usually, you just ring up one of the big companies and they do it all over the phone without any checks or paperwork. This is reason for concern in itself. So, buyer beware! For more information and professional advice, visit www.protectmywealth.com.au

PD

A question that is on many lips lately with the global meltdown and large institutions in the US falling apart faster than Michael Jackson’s nose. Many of the other large institutions are looking frighteningly similar to Jacko aswell.

Unlike our American countrparts, we are governed by a defined set of laws in Australia through the likes of ASIC (Australian Securites & Investment Commission) and APRA (Australian Prudential Regulatory Authority). You may have heard of these two organisations. The easy way to explain what they do is; APRA looks after all the big organisations such as banks and insurers to ensure they are doing the right thing with their money. ASIC overseas all of the institutions and individuals who are giving advice to others, such as financial planners, company secretary’s, etc.

Considering they are government organisations, they have had their fair share of stuff ups in the past, but overall they do a pretty good job of keeping the mongrels honest. APRA has a set of rules for insurers especially. They MUST have a mimimum of 30% of their insurance policies in cash held at any one time. This is in case something catasrophic goes wrong and the fan gets dirty.

There have only been a handful of times that insurers didn’t meet these requirements, and because APRA has quite a stringent hold on that requirement, the insurer responsible was required to stop trading until theu sorted themselves out and had the required funds in their account.

Australia has some tough laws pertaining to the minimum standards for insurers, but these dont apply to ‘General Insurers’ because they have such a large turnover of claims, it’s quite hard to manage that type of capital. general insurers are easily identified by offering car insurance, Public liability, etc. But that’ for another time. I hope that helps.

PD

It’s not a question that is posed in your everyday agenda of self-asking questions. But I’ve come across an interesting article relating to the average amounts insured for people in Australia. Why are women so underinsured?

This report states that the breakup of those who have personal life insurance is 72% male and 28% female. Now that’s a pretty big gap! Isn’t the general consensus that males are equal to females? (feminists, feel free to hollar AMEN!)

The other interesting point to come from this report is that the average insured amount is $525,000. Now, according to Residex, the average house price in Sydney is $565,000. This not only leaves a gap of $40K, but also a gap where the income needs to be supplemented somehow. Just think what is needed when one of the parents dies. The other partner generally has to take on the running of the household by themselves, and even take time off work to deal with the enourmity of the loss. This can lead to unemployment, bills falling behind, etc. It’s all well and good to pay off the mortgage, but what about everything else?

If you’re unsure of how much you need to insure yourself for, or ‘your worth’. See our other post at “How Much Insurance Do You Need” to help you.

So, if you’re thinking about insurance for yourself, also consider your partner aswell. There are many different ways to fund it if affordability is an issue. Look through this site for other solutions. Just don’t think that the main breadwinner is ‘worth’ it.

PD

Much of today’s reasons for not having adequate, or any, insurance is affordability. And it’s not surprising due to the ever growing mortgages, especially in the capital cities, which are not in line with the ever stagnant salaries.

Insurance is usually one of the first casualties to the harder times. I haven’t had too many people during this down turn, but I don’t believe we have seen the worst of it yet. There are still some hard times to come unfortunately. KRudd can keep on handing out freebies, but until the addresses the employers in this country, those who are employed will be in for a unsure time over the next 12 months. But I digress, that is for another post.

We all know that insurance is an important part of life, and to cut it out altogether leaves a certain risk. You can, however, afford to have insurance even without any money! No, insurers are not doing a KRudd and giving out policies, but there is a way to use other means to help your cashflow and still keep your cover in force. The simple answer is ‘Superannuation’.

Especially if you have several old supers from previous jobs, they can all be rolled together and the life or income insurance attached to the super. This way, what would normally be paid from your bank account, will now be paid from your superannuation account. Thanks to the government’s co-contribution scheme, if you earn less than $68,000 year and pay some of your own money into suoper, they will match your contribution 150%!

For example, if your insurance is $500 year, and you use the example above by putting it into super and pay $330 year into it. The government will pay $1.50 for each $1 you’ve paid = $500. By paying it through super, you save yourself $170 year. Obviously the more your premium, the more you save, but you get the picture.

There are many questions that come along with this subject: Wouldn’t that eat into my super?, Isn’t there rules for super not to pay out before retirement?, What if I only have my work super?, Can I pay into the super still?

All these questions are ligitimate, and I will cover them off in the next post on this subect. If you would like someone to talk to about making this a reality. Especially if affordability because of the financial crisis is taking place, please email me.

PD

It’s a question I am asked on a daily basis, and each person is different. There are lots of different things that need to be taken into account before you can completely know how much you need. Many people say “I just want to cover the mortgage”, but it’s much more than that! What happens to the children and their educational costs, even if they are in a private school? If your spouse works, more often than not, they will be grief stricken and need extended time off work, if they return at all. This has a major impact on the family income.

There’s these things and others which need to be considered. But it doesn’t have to be that hard. All you need is a pen and paper, and 10 fingers, and you can work out an approximate level of cover that’s appropriate for you. Ready?

Now, this is a silly little excercise, but it works! Write down the side of the page:

D, I, M, E and leave room beside them for your calculations. D is for Debt. This is personal debt, such as credit cards, personal loans, business loans (excluding mortgage)

I is for Income. This is your gross (before tax) income. If you are self employed, it’s whatever you take home before tax, after expenses. Multiply this by 5 years to cover for loss of income for that time.

M is for Mortgage. This is the outstanding amounts on your mortgage/s so the total amount will be paid in the event of your death or disability.

And E is for Education. This is your children’s education. How much does it cost to put each child through school? Even if they’re in a public school, you still need to get them uniforms, lunches, stationary, shoes, etc. Work out (roughly) how much is the annual cost of each child, then multiply it by how many years they have left in school. Do this for each child and add it up in this section.

Add them all up and you have the grand total of what you should be starting to look at for quotes. You may have a number that could represent a telephone number, but don’t worry, it isn’t always as expensive as you think. Remember, this is just a guide, so you start here and work your way down. When you talk to your adviser, they can help you with figures and affordability.

I will cover off a few different ways to make insurance more affordable in another post soon.

PD