In an unpredictable world, insurance is a necessity, not a luxury. While many Australians understand the importance of insurance, one of the biggest barriers to taking out and keeping life insurance is affordability.
Despite most working Australians having some cover within their super, affordability remains a key contributor to underinsurance in Australia.
To help tackle the insurance affordability issue, there are four things you can look at to make an immediate difference to your clients.
The right type of cover
When choosing the right type of cover for a client, it’s vital to consider their lifestyle, family situation and retirement goals when providing holistic insurance advice. But it’s just as important to ensure the level of cover matches their ability to continue to make premium payments into the future. Once you know the level of cover they need, you can then look at how to structure their policies in the most affordable way.
Easing cash flow pressure
Many Australians are constantly juggling their cash flow – managing everyday expenses as well as ongoing expenses, such as mortgages and school fees. Covering the cost of insurance on top of this can add unwanted strain to already tight budgets. But funding certain types of insurance through super means premiums won’t come out of your client’s after-tax income – alleviating unwanted cash flow pressure.
Bundle insurance and save
Some insurers offer premium discounts, via multi-cover discounts, when multiple types of insurance are bundled together – providing real savings on premiums. A way to secure the most comprehensive cover available and access some of the benefits of insuring through super is to link insurance across two policies (one inside super the other outside super).
Maximise tax efficiency
Insurance affordability could be further improved by maximising tax efficiencies. For example, income protection premiums are generally tax deductible both inside and outside super, but the rate of the deduction does differ. Income protection premiums outside super are deductible to the client at their marginal tax rate (which could be as high as 45%1), while inside super, premiums are deductable (to the trustee) up to the super tax rate of 15%.
By working with a provider who offers flexible insurance solutions that can be tailored to your clients’ needs, you can make insurance more affordable for your clients and help them grow and protect their retirement.
MLC is committed to helping Australians save their retirement. With MLC’s extended multi-cover discount, your clients can get up to 30% off their Income Protection premium when they bundle MLC’s Life Cover, Total and Permanent Disability and Critical Illness insurance, funding at least one through an eligible MLC super account.
For more information on the tools MLC offers to support you, please visit mlc.com.au/savethefuture
Sources and assumptions
1 Not including the Medicare and Temporary Budget Repair levy
MLC life insurance policies are issued by MLC Limited (ABN 90 000 000 402 AFSL 230694).
This communication contains general information. Any advice if contained herein has been prepared without taking account of an individual’s objectives, financial situation or needs. It should not be relied upon as a substitute for financial or other specialist advice. Any tax information does not constitute taxation advice and is based on our interpretation and continuation of current tax laws and relevant legislation as at the date of this communication.
You should obtain a Product Disclosure Statement or other disclosure document relating to any financial product before making a decision to purchase it. A copy of the Product Disclosure Statement is available upon request by phoning the MLC call centre on 132 652 or on our website at mlc.com.au
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