Many of our clients often hold both Life and Total & Permanent Disability Insurance inside their superannuation funds, as is often the case for Australian expats. The issue with this for many is that the insurance became invalid when they changed their country of residence, which they would often only discover at the point they tried to submit a claim. This detail is often buried deep within the Product Disclosure Statement (PDS), so your insurer has no obligation to inform you that because you’ve moved offshore you should consider other options.
In this week’s article we explore some key strategies for you to ensure that your insurance covers you globally.
Let’s start with the different types of cover
Life insurance provides a lump-sum benefit upon your death to ensure your family can maintain their current lifestyle. This can be used to pay funeral expenses, pay off an outstanding mortgage for the family home as well as other debts, provide education to your children and provide an ongoing income to maintain their day-to-day lifestyle.
Total & Permanent Disability (TPD)
Total & permanent disability (TPD) insurance provides you with a lump sum payment in the event you are permanently injured or disabled. This can be used to pay off any debts (e.g. mortgage), assist with any medical costs and the costs associated with modifying your home or vehicle that may be required as a result of the injury. You can also use this as capital to assist in generating an income to meet your ongoing living expenses if you are no longer able to work for an income.
Critical Illness insurance provides you with a lump sum payment in the event you are diagnosed with critical illness or injury (e.g. cancer, heart attack or stroke; the insurer will have list of specific illnesses that are covered). This can be used to pay off any debts (e.g. mortgage), assist with any medical costs and supplement your income while you are unable to work.
Income Protection (IP)
Income protection (or salary continuance) cover provides you with an ongoing income in the event you are unable to work due to illness or injury to assist in maintaining your lifestyle needs. The amount should represent a maximum of 75% of your current income.
What types of cover can be held within super?
Within your superannuation fund, you can hold Life, Total & Permanent Disability, and Income Protection, which is generally in the form of a two year salary continuance. Critical Illness can no longer be held within your superannuation fund and must be held outside. It’s important to review any cover you are currently holding within superannuation to ensure that you’re not paying unnecessary premiums.
How to check if your insurance cover is valid
The easiest way to check if your insurance cover is valid is to speak to your financial planner, and have them review this for you. They will often review the PDS for your cover and speak to your insurance fund about your cover to confirm whether or not it’s valid for overseas residents. If you don’t have a financial planner, you can call your insurer or superannuation fund yourself and discuss any implications of residing overseas. Often, cover will either be invalid for overseas residents, or require you to move back to Australia upon any claims being submitted.
What to do if your cover is invalid
If you find out that your insurance cover isn’t valid while you’re living overseas, it’s important to explore your options. You may wish to implement insurance cover in your current country of residence, such as Singapore, that will remain valid for you if/when you return to Australia. This also enables you to lock in lower insurance premiums that will remain in place until you decide to cancel your cover or it reaches the expiry date. If you wish to hold your insurances inside your superannuation fund, it’s important to review your options with your financial planner to identify an Australian provider that will cover you overseas. You also need to ensure that you’re fully aware of how long the cover will remain valid if you find that your overseas position is extended.
As always, seek the guidance and advice of an experienced financial planner who can explore all of your options and ensure that you have the right insurances based on your personal circumstances.
To your financial success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.
To learn more about how we may be able to help you, please contact us:
✆ +65 8282 5702
To discuss how these changes affect you, click here to book a complimentary consultation: http://bit.ly/Book-Your-Consultation
General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.