You don’t have to cut corners on your insurance or sacrifice the adequacy of your cover to make your policy more affordable.
Choosing A Payment Structure
Choosing stepped premiums in the first few years of your life insurance policy may help you keep the cost of cover low in the beginning. Stepped premiums allow you to start paying your insurance at a lower rate, which then rises as you grow older. Your insurer calculates your premiums on each policy anniversary based on your age.
You may consider moving to level premiums as you become more capable of paying your insurance. Although they’re more expensive in the beginning than the stepped structure, level premiums generally offer a good long-term option because premiums are calculated based on your age when you first take out level premiums.
Using Your Super
Taking out life insurance through your superannuation fund may lower the cost of insurance because premiums may be paid using concessionally taxed contributions to your super. Premiums also tend to be cheaper because super funds bulk buy insurance policies and can negotiate discounts.
But keep in mind that super funds may offer limited cover. Talk to your adviser on how to ensure you have enough cover.
Waiting For A Longer Period
When taking out income protection insurance, you can choose a waiting period. The longer you wait before receiving income benefit payments, the lower your premiums.
You can also choose between an indemnity policy and an agreed value policy. Taking out indemnity cover may help you keep the costs down because premiums are generally lower than those for agreed value cover.
Income protection premiums are usually tax deductible if you fund your cover outside super, helping make this policy affordable. If you pay your insurance through your super, premiums are generally tax deductible to the super fund.
With so much to consider, seeking advice from a professional financial adviser is important to help make insurance affordable – and manageable – for you and your circumstances.
Disclaimer: This information is of a general nature and has been prepared without taking account of your personal needs, financial circumstances or objectives. Before acting on this information you should consider whether the information is appropriate for you having regard to your personal needs, financial circumstances or objectives. This information is current at March 2018 but may be subject to change. The case study and effective tax rate are hypothetical and are not meant to illustrate the circumstances of any particular individual. Before acting on this information, you should consider the appropriateness of the information, having regard to your needs, financial circumstances and objectives. This information is our interpretation of the law and does not represent tax advice. Please see your tax adviser for advice taking into account your individual circumstances. RI/SCCPD/0618 RI Advice Group Pty Ltd | ABN 23 001 774 125 AFSL 238429