Aussie Finance Blog

Australian personal finance news, tips and advices.

Comparing car insurance

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What should you look for when comparing policies?

Cars are a big expense, especially when it comes to insurance. Whether you’re buying insurance for the first time or your policy is due for renewal, you should always start by comparing your options. But where to start? Here are five things you should consider when comparing your car insurance options.

The cost

Cost is the first point of comparison for people when comparing policies because it’s the simplest way to compare, ie policy A costs more/less than policy B. ... (read more)

Health Insurance – Who Needs It?

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It’s something you hear about often, drifting in and out of conversations, and you probably know you should take an interest, but as usual you turn the other way and talk about something else. After all, who really needs health insurance? Maybe you think you don’t need it and everything is fine. Possibly you feel it’s an expense you would rather not make, but can you really afford to do without health insurance?

The reality is that health insurance is there for a time when something goes wrong. You are more than likely to insure your house or car, so why not insure your most important possession – your own health? It’s a risky business to go about your daily routine without being insured. Here are some reasons why you really should consider health insurance.

The uncertainties of life

Everyone goes through ups and downs in life, and it makes sense to be prepared for any eventuality. We can suffer misfortune any time, and although you may feel bullet-proof when young and healthy, disaster could be lurking around the corner. If an unforeseen occurrence leaves you bedridden for a time due to an accident or health issue, you will really appreciate someone covering the costs. Health insurance offers great peace of mind in knowing you are not going through life unprepared.

The financial safety net

You may have savings and reasonable earning power providing a cushion in case of emergency. On the other hand, hospital and surgery bills can chew up money almost as fast as it is printed, and the nest egg you have been building could certainly go toward something more interesting than a vacation in a sterile hospital ward. It costs thousands of dollars per day to stay in a hospital, and the price tag on a broken leg is around $7,000. Health insurance will offset these costs, and protect you from suffering the shock of receiving an enormous bill when you discover just how much these unforeseen circumstances can cost.

Smart health

The reality is, if you are not covered by health insurance, you probably don’t understand or appreciate the value of your own good health. An interest in health insurance will also stimulate a desire to look after yourself, possibly with a new exercise program or better diet. Smart people are interested in healthy living options. We all know someone who took a turn for the worse health-wise, but somehow we never think in can happen to us. It’s one thing to be proud of your health, but another to be reckless with it.

Health insurance is not governed by age, present health status, or work. Illness or injury can strike anyone when they least expect it. Healthy living involves a two-pronged defence. On one hand, you can take all sensible measures to maintain good health, and on the other hand health insurance will guarantee you are covered if and when the unexpected happens. Put your mind and body at ease by looking into health insurance options that suit your lifestyle.

Read more about insurance related tips here.

The Risk of Being Under-insured

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Construction costs have increased significantly since the carbon tax was introduced, with additional expenses filtering through the building sector from top to bottom. Soft economic conditions have also affected small construction companies, with many owners under-insuring their business against potential losses. A lot of businesses are under-insured, with few owners understanding the ramifications until they make a claim.

For example, a construction company owning a building valued at $3 million but insured for only $1.5 million, will only be able to recover half of the loss when making a claim. If fire or flood causes $500,000 damage the insurance company will provide $250,00, with the business owner expected to make up the shortfall. Many businesses don’t even realise they are not sufficiently covered.

According to Allan Manning, managing director of LMI Group:

“I get these two looks when I explain it to people: First, a look of understanding, then a look of horror, because they realise how much it is going to hurt them.”

Insurance companies have no obligation to replace assets that are under-insured, and recommend that customers check regularly to ensure adequate coverage. Being under-insured simply means that the amount of insurance coverage is less than replacement value or market value. By revisiting insurance policies every year, or whenever the business expands, a business owner can make certain the value of the business is reflected by adequate insurance cover.

Almost half of all Australian businesses have kept their insurance cover at the same rate during the past three years, suggesting that they have not increased cover to reflect rising costs, stock increases or expansion. Increased energy costs, including waste management and manufacturing are in part the result of the carbon tax, and the under-insurance scenario will only be exacerbated for many companies.

The sluggish economy has also resulted in a lot of businesses getting creative in tightening up their expenses. Unfortunately, saving money in the short term by taking out a lower insurance premium is risky, and can result in small businesses folding in the event of an unforeseen insurance event.

For many small business owners, their company is their dedicated income source. The business is often a person’s sole investment and also their superannuation fund. Unless business owners take the opportunity to invest in insurance cover that reflects the value of their holdings, the price in times of need may be more than the business can bear.

The cost of insurance is something that needs to be factored in prior to starting a business. It is also something that requires revisiting on a regular basis as part of long-term business strategy.

Ensure Your Future with Income Protection Insurance

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For business owners, there is no opportunity to take paid sick leave. Unexpected illness or injury can result in turmoil for your business if you remain uninsured as an individual. It’s important to insure yourself just as you insure your business if you want certainty regarding your future.

Businesses are constantly on the lookout for ways to increase profit margins and achieve sustainable business growth. It makes good sense to ensure your business doesn’t come to a grinding halt if you are out of the picture for a period of time.

What is income protection?

If you are unable to work due to injury or illness, income protection insurance will provide the bulk of your income, usually around 75%, while you are incapacitated. For example, if your business income is $20,000 per month, your benefit amount will be $15,000 per month. Any amount of monthly business income can be nominated when applying for income protection insurance, but you will need to verify the figures if making a claim.

There are a number of policy options available, with the “waiting period” and “benefit period” being two important considerations. The waiting period refers to the length of time you are off work before the benefits start being paid. The benefit period is the duration of time the benefits will be paid. For example, a waiting period may be 30 days and the benefit period up to 60 years of age. In this scenario you will start receiving benefits after 30 days and they will continue until you reach the age of 60 or recommence work.

Business owner considerations

The fact that the business owner is off work doesn’t automatically translate into a loss of income. Some businesses can continue perfectly well, at least for a time, without the owner present. The insurer will need evidence that business owner’s income is being adversely affected by his or her absence.

Some situations are very straightforward. In the case of an injured trades person without additional staff, it will be easy to determine that their wage has become negligible. In cases like this the income protection claim is quite simple. A different scenario could involve a store owner who has become ill but store revenue remains relatively stable. If there is no noticeable loss of personal income there will be no payout from the income protection policy.

If you are uncertain about which policy suits your needs, it could be a good idea to speak to a professional who will provide various insurance options. To ensure you take out a policy that is right for you, take the opportunity to speak to a qualified financial advisor.

Tax deductions

Personal income protection must be owned by you as an individual rather than in the name of your company, but tax benefits are still available. Whether you are self-employed or the owner of a large business your income protection policy is tax deductible. This is an area that can be easily detailed by your accountant.

The motto, “better to be safe rather than sorry” is worth remembering for business persons. There will always be a degree of risk in business, and that is what can make it exciting and rewarding. Personal income insurance can guarantee those hard earned rewards remain in your safe-keeping.

Read more about income proteciton on the ASIC website.

Do You Need an Insurance Broker?

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An insurance broker is hired in order to help your business obtain the appropriate cover. They assist clients by helping avoid risks or unnecessary expense. Some business owners consult an insurance broker for general insurance advice, although a qualified broker can also handle complex claims and legal matters.

Broker/client relationships take many forms: ... (read more)