Common myths and FAQ

Before answering the question, consider the following facts:

Workers Compensation
  • Available to an employee if they get injured at work
  • The injury must be a direct result of some kind of negligence on the employer's part
  • If the injury occurs when the employee is out of work, no benefits under Workers Compensation will be payable
  • The benefit period is between 13 weeks and 9 years depending on the state and territory
  • The benefit is usually capped/limited
Income Protection
  • Used for covering the areas where Workers Compensation cannot
  • Generally provides coverage anywhere 24 hours a day, 7 days a week
  • Covers both sickness and accidents in or out of work
  • Benefit payments generally cover up to 75% - 80% (depending on the insurer) of your salary and are not capped
  • Benefits payable until age 65 or 70 depending on the insurer

Research has indicated that there is a greater number of accidents occurring outside of work than inside of work – 75% compared to 25%. If you heavily rely on your income to pay for your expenses, you should really consider getting Income Protection.

While putting your money in your bank and receiving interest seems to be a good idea, there are actually much more investment options out there that can provide you with a better return. At Wealth Edge Financial Services , we can guide you by exploring different investment options, and we can build an investment portfolio for you based on your investment attitude and needs.

Generally, there are four main asset classes of investment: cash, fixed interest, property and shares. Cash and fixed interest are considered defensive assets as they are less volatile. Property and shares are considered growth assets as they produce great returns over the longterm but are volatile in the shortterm. Great returns are accompanied by great risks.

Although Group Insurance is generally cheaper, it does not mean it is better than Individual Insurance. It all depends on each individual's circumstances. While holding a Group Insurance policy, it is important to acknowledge the following disadvantages:

  • Generally it can only be obtained inside superannuation and from an employer
  • Generally it has less features compared to an Individual Insurance policy (an Individual Insurance policy can have features like Level Premium, Double TPD, Agreed Value Income Protection, Increasing Cover Amounts Without Medical Evidence, Premium Freeze, Continuation Option at Expiry and many more)
  • Benefit amounts may be limited
  • You may be unable to choose your Benefit Period and Waiting Period for your Income Protection Cover
  • Generally you cannot acquire Agreed Value Income Protection Cover
  • Your covers may discontinue if you leave your employer or if contributions are not made
  • You cannot link Critical Illness/Trauma Cover
  • Cover amounts generally decrease as you become older
  • Premiums are generally Stepped (increase as you become older)

While Industry Super Funds generally have lower fees, they usually do not have the amount of investment options that Retail Super Funds offer. This means the member has fewer investment choices. It is also generally more difficult to access independent financial advice through an Industry Super Fund. Retail Super Funds are usually able to provide insurance packages that are more comprehensive.

Benefits of insurance inside superannuation
  • Capable of funding premiums with your superannuation balance and as a result save in cash flow
  • If you are under an employer-sponsored plan, premiums may be more competitive and underwriting may not be required at the start of the policy
  • Paying premiums via superannuation contributions may be tax-effective for some people
Disadvantages of insurance inside superannuation
  • You have to be severely disabled to be eligible for a Total and Permanent Disability (TPD) payment
  • TPD benefit is taxed as superannuation withdrawal
  • There can be delays in processing Life Insurance benefits as they need to go to the trustee before being distributed to the beneficiaries
  • If you are unable to make a binding death nomination, your Life Insurance benefit may not be paid to the people you want
  • Beneficiaries who are not financial dependents will be liable to pay tax on Life Insurance benefits
  • Premiums deducted from your superannuation account will erode your overall retirement benefits
Benefits of insurance outside superannuation
  • The definition of Total and Permanent Disablement (TPD) can be more generous
  • Life Insurance benefits can generally be paid out quicker
  • Lump-sum benefits are tax-free
  • Income Protection premiums are tax deductible on the individual's tax return
Disadvantages of insurance outside superannuation
  • You will have to fund the premiums with your cash flow
  • You will be unable to enjoy the benefits of an employer-sponsored plan, so premiums may cost more and underwriting is required
  • Premiums are generally not tax deductibleme people
Investing inside superannuation
  • Superannuation contributions and earnings are taxed at 15%
  • Contributions can be made before tax to reduce income tax
  • Contributions made by self-employed people can be tax deductible
  • There are limits on the amounts you can contribute into superannuation
  • There are age restrictions which need to be satisfied before one can contribute into superannuation
  • Superannuation is not accessible until you meet a condition of release
Investing outside of superannuation
  • Generally, there are no age restrictions on when you can inves
  • Investments are generally accessible at any time
  • Investments are generally not tax deductible
  • Investments cannot be made before tax
  • Earnings are taxed at marginal tax rates

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