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Retirees and insurance

Retirees and insurance

If you have retired and think the days of reviewing your financial plans are over, think again. Now is the time to review your entire plan in-line with your new lifestyle and pay particular attention to any insurance cover in place.

Policies expire

People often take out insurance while they are working to protect their dependants if they are injured and can’t work, or they die prematurely.

However, when you reach a certain age, such as retirement, some policies may expire. It’s important to work with your financial adviser to keep your policies current and appropriate for your stage of life.

Insurance options

Term life insurance, or death cover, provides a lump sum payment if the life insured dies or becomes terminally ill. The lump-sum payment received may go towards paying off debts, providing for education or allowing beneficiaries to continue to live in the family home.

 

Is this included in my Super?

It could be, but you need to check and be sure that it matches your individual needs. Life insurance included by default within Super can be very limited.

When does it expire?

Usually around age 99, but check your individual policy cover.

Total & Permanent Disability (TPD) insurance is paid in a lump sum if the life insured becomes permanently disabled  because of an accident or illness. The insurance payment may cover medical expenses, living expenses, home modifications or pay off debts.

 

Is this included in my Super?

It can be, but you need to check and be sure that it matches your individual needs as default TPD included with Super can be very restrictive and definitions of ‘total and permanently disabled’ vary significantly.

When does it expire?

Generally at age 65, which can coincide with retirement, so you should speak to your financial adviser about the type of cover you may need in retirement.

Trauma insurance covers a major illness or injury, such as a stroke or car accident. It covers specific medical conditions and is paid out in a lump sum that can be used for any purpose, such as living or medical expenses. Trauma cover can be paid even if you can still work and you can buy a policy even if you are not working.

Is this included in my Super?

No, it is not, you need a standalone insurance policy.

When does it expire? Typically, at age 70.

Income protection insurance covers loss of income if the life insured becomes disabled due to an accident or illness and cannot work. Typically, these types of policies pay 75 per cent of the insured person’s income but there are many variations in their terms.

Is it included in my Super?

Default income protection included with Super can be very restrictive in terms of the amount of cover, when it commences, how long it lasts and the definition of disability that must be met.

When does it expire?

Typically, at age 70.

What about my super balance?

There are usually additional rules for policies held within a superannuation fund, and once you reach a defined age you may no longer be able to make contributions.

If your insurance is through your super fund, the premiums are deducted from your super account balance so once you are retired or have attained age 65, if you cannot contribute to superannuation, the deduction of the premiums can take a hit on your account balance which your financial adviser can work through with you.

To renew, or not to renew?

Life insurance coverage through super usually ends at the age of 65. When deciding whether to continue your life insurance cover, you may wish to consider such things as outstanding debts, mortgage repayments, the impact on dependents and the type of retirement lifestyle your superannuation fund can provide.

In most instances your insurance needs decrease with age and the range of relevant policies diminishes. However, some policies allow you to extend for a fee.

Funeral insurance plans

Retirement may be the time to consider taking out a funeral plan to cover funeral expenses when you pass away. Insurers offer age-based policies with premiums that start lower and gradually increase, or fixed policies with premiums that remain static1.

Ready to review?

Each person’s circumstances are different and if you are unsure what insurance policies you need, talk to  your financial adviser who can help work through your options now, and in retirement.

1 www.moneysmart.gov.au/insurance/funeralinsurance

Please note: inTouch is of a general nature only and neither represents nor is intended to give specific advice on any particular matter. This publication does not contain tax advice and it is recommended that you speak with a tax specialist about your circumstances. We strongly suggest that no person should act specifically on the basis of information contained herein but should obtain appropriate professional advice on their own personal circumstances. The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice’s position and are not to be attributed to RI Advice. They cannot be reproduced in any form without the express written consent of the author. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. Materials are published by RI Advice Group Pty Ltd. ABN 23 001 774 125 AFSL 238429. The information in this publication is current as of February 2020.

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