LIFE INSURANCE

Who owns your insurance?

Alex is our resident detail guy, which is handy when talking about the finer points of insurance. In this case, he investigates the importance of getting policy ownership right … and tweaking it to suit life changes.

 

Whenever you take out insurance there is a simple question that can have drastic consequences to the end result come claim time:

 

“Who is the policy owner?”

 

In most cases this will be you, your partner, your business partner or sometimes your parents/siblings. Assigning ownership to the right person/s is a great start but life changes can also require a re-look at this ownership structure.

 

For example, you might have taken out life insurance when you were still single and now you have a partner and kids and you’ve started a business. In this case, you will definitely need to re-look at your cover and ownership of these policies.

 

For further explanation, let’s look at a common example:

 

·      Joe and Mary are married and have two kids. Joe owns $500k of life cover to set up his kids in case he is not around anymore.

 

·      Years down the track, Joe and Mary decide that being married is not the way forward and both go their separate ways.

 

·      Joe stays single but Mary remarries a few years later to John who already has three kids.

 

·      Joe suffers a serious trauma and dies not too long after. Sorry about the tragic story but at least he had cover …

 

·      Life insurance proceeds are paid out to the policy owner.

 

 

If Joe never changed ownership, his policy is still owned by Mary, meaning the $500k is paid to Mary.

 

Mary can decide where that money might go. Joe’s kids might get it or Mary might decide to share it with her three stepchildren as well—probably not what Joe wanted.

 

Needless to say, this is a far from an ideal situation. And it wouldn’t be hard to imagine an infinite number of permutations of this scenario that could make things even worse.

 

So this all boils down to the fact that, aside from insurance being important, setting up the ownership of that insurance, and tweaking it to suit changes in life circumstances, is probably just as important.

 

This sort of detail is the stuff a good insurance adviser will talk you through. We’ll help make sure that what you intend to happen, does happen if and when it’s time to make a claim.

 

Alex is our insurance expert in the office and would happily help out with all insurance questions you would have in regards to this article or insurance questions in general.

 

Alex Barendregt is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 

Funeral Insurance: How to Avoid the Guilt Trip

Alex wades into the murky waters of funeral insurance vs. life insurance to bring some clarity to a conversation often thick with emotion.

Recently, during an insurance review, a client had an important question for me: “I have bought some funeral insurance over the phone, but I don’t know what it does? Could you help me understand it?”

Needless to say, I was quite surprised not only that someone even offered such a complicated product over the phone but also that it was purchased without full knowledge of what it was. On the other hand, the client felt obliged to take it out. The phone salesperson knew exactly what to say to use guilt to make the sale.

Funeral insurance might seem a straightforward product, however, the mechanics behind it are not. Funeral insurance is a sort of insurance with hardly (if not any) underwriting requirements. This means that, whether you’re healthy or unhealthy, you will pay the same price based on age, gender and smoking history. Because of the lack of thorough health checks, it is quite expensive for everyone.

In this particular case, the funeral insurance was 15 times more expensive than regular life insurance! The reason the client purchased it was due to their love of for their children—they did not want their passing to be a burden on their family.

I finished the review by explaining that life insurance policies actually have a funeral benefit or early payment of benefit built-in. Your family will have access to an advancement of up to $15k upon receiving a notification of death. So, life insurance can have you covered for funeral insurance and all on a much lower premium. I advised the client to cancel the funeral cover as there was no reason for a young, healthy professional to have it.

Moral of the story, if you have any questions regarding insurance policies or know of someone with questions/doubts, come and have a completely guilt-free and obligation-less chat to an adviser at Velocity Financial.

 

Alex Barendregt is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.