How To Protect Your Assets With Personal Insurance

As our financial commitments grow, whether it is through getting married, having children, starting a business or simply trying to build our wealth, personal insurance becomes more and more important. For Australians, this insurance is a safety net for a wide range of different areas, including health, family, and business investments. No matter your net worth or total assets, unexpected events do happen. With life comes risk, and it always helps to be prepared.

Personal insurance can offer you financial protection from workplace events such as property damage, legal liabilities such as workplace injury, and loss of income as a result. With the right coverage and safety net, you can keep your assets well protected for future generations.

In any case, familiarising yourself with the  types of insurance available will reduce financial stress for both you and your family. This is particularly important for individuals that have multiple investment types, assets, and a high-net worth.

So, how can you protect assets and solidify your future with personal insurance? Throughout this article, we will explore the various forms of personal insurance, as well as the term life policies available to loved ones. 

What is Personal Insurance?

No matter how much you have in the bank, personal insurance is the safety net to keep it afloat. If you have suffered from a permanent illness, disability, or family death, personal insurance is a guaranteed security for income protection that covers that trauma, accidents, and permanent disability.

Life insurance is another subset of personal  insurance; a policy designed to provide a lump sum payment to your beneficiaries after your death, including funds to pay estate taxes. If there is a waiting period due to you falling seriously ill, you are guaranteed to be protected financially.

Do you want to protect your assets and distribute family wealth according to your wishes? As a financial advisor servicing Malvern, Toorak and Prahran, we guide you through the various options and avenues available.

Why Invest in Life Insurance With a High Net Worth?

Free Man and Woman Sitting at the Table Stock Photo

After accumulating wealth, you naturally want to pass on these assets to future generations. Life insurance can help you maximise after-tax estate. Whether your end goal is an investment tool or financial reassurance, there are many reasons to consider types of life insurance.

Let's explore three of the most important by-products of life insurance policies.

1. Life Insurance Is Often Exempt from Tax 

Life insurance is generally taxable if the payment is made from a policy held inside a superfund, or if these pay-outs are from company key persons. 

If you have a high-net worth, life insurance is an excellent option to consider, especially when thinking about estate equalisation strategies. In many cases, life insurance settlements are not taxable. If you have life insurance held outside a superannuation fund, then generally proceeds from the policy are not taxable if paid to the original owner of the policy or someone that acquired their interest in the policy for no consideration. In this case, your family can easily pay off debts, additional living expenses, and be able to afford their own asset protection; you can also ensure all beneficiaries receive their “fair share” of your estate, according to your wishes.

However, everyone's financial situation is different, so always consult a financial advisor for guidance regarding possible insurance pathways.

2. Life Insurance Can Protect Business Owners 

Are you an entrepreneur who co-owns a business? Types of life insurance can help you to fund a buy-and-sell agreement if the owner were to pass away or suffer an injury or illness unexpectedly. Likewise, if you run a family-owned business, a key person insurance policy can protect your business from various financial factors.

This insurance might replace income lost, such as a loss in revenue, recruitment costs to cover a new employee or support paying creditors or loans to run the business. Depending on whether your insurance covers a “capital” item or a “revenue” item, it can affect the tax treatment of these policies. If you want to learn more about how these tax implications will work for your business, we would recommend reaching out to an experienced financial advisor. 

3. Life Insurance Is An Asset 

Building wealth means investing for the future, and the accumulation of assets is a proven pathway to sustained financial security. While not as tangible as property, life insurance is in itself a personal asset. Understanding this aspect of insurance policies, therefore, can boost your cash value component, offering lifetime coverage for you and your family. When this insurance is no longer needed, it may also be sold as a life settlement.

Whilst not common practice,  starting in Australia in 2009, it is possible to consider  a transaction which involves a policyholder selling entire life insurance policies – often a fund – to an investor or third party. The investor will purchase this policy, committing to paying any future premiums and will profit once the insured passes.

Looking to use your insurance as an asset? As an independent financial advisor in Melbourne, we make you aware of all the valuable assets that you have, helping you to make an informed decision.

Top Personal Insurance Options

The types of life insurance you will consider will depend on your financial goals. You may want to replace active income if you're earning a salary or provide extra funds to your family, and personal insurance makes this possible.

Term Life Insurance Cover

If you’re concerned by illness or an unexpected death in the family, term life policy insurance exists for total peace of mind. Term life policy insurance in Australia can support your loved ones for a period of time until they reach a certain age, or are made financially secure by the policy benefit pay-out. If you're in the later stages of your life, this is also an option to keep your family assets protected. Life insurance cover in Australia can be for benefit amounts well into the millions of dollars, if required.

With term policies, a benefit amount needs to be nominated and if you pass away, your family will receive a pay out to cover any number of contingencies: this could be ongoing living costs, educational expense, loan obligations, funeral expenses or the like. 

Income Protection

As a busy business owner with multiple income streams, you may be concerned about loss of income. An income protection insurance policy can ensure the continuation of payment by your insuring provider. 

Offering up to 70% of your regular income, this is paid out in installments (typically monthly), just like a salary. Some policies cover you for two to five years, whereas some cover you until you're 65 or 70.

Trauma Cover

Also known as crisis cover, or critical illness cover, this personal insurance provides a lump sum to the insured in the event of suffering a major, serious, medical trauma. Your insurance provider of choice can pay you a sum of money if you are diagnosed with a life-changing injury or illness and require medical treatment. Conditions covered typically include illnesses and conditions such as cancer, stroke, heart attack or coronary bypass.

However, if you're making any life insurance claims, you have a duty of disclosure. Your insurer will need to know if you are a smoker, and whether you have a serious pre-existing health condition. Pre-existing conditions can also be covered, depending on the terms offered by the insurer.

Total and Permanent Disability Cover

Total and Permanent Disability Cover (TPD), involves paying a lump sum if you become completely (totally) disabled and are unable to work. This payment can help with a wide range of costs, such as rehabilitation, medical expenses, paying debts, and cost of living. 

Total and permanent disability is defined as being unable to work in your usual occupation or being unable to work in any occupation. Always check your eligibility requirements.

What To Consider Before Taking Out Life Insurance?

Free Handing Out of Documents  Stock Photo

Whether you're considering term policies or more permanent life insurance for your family, there are things you need to consider before taking out insurance coverage. For example, if you have investment properties you want to protect, the type of insurance matters.

  • Coverage requirements. How much coverage do you need, considering your financial goals? Outstanding debts, medical services, and future plans can play a part.
  • Premiums. How much can you pay in premiums each month? This can depend on your age, health, coverage amount, and policy type.
  • Policy terms. Understand the coverage, inclusions, and limitations for the policy. Read into health insurance companies and what they have to offer.
  • Health and lifestyle. This can impact the cost of your premiums, as well as the coverage available to you. When taking out life insurance, you need to detail your health history, current health status, and lifestyle to the provider.
  • Beneficiary choices. Always make sure your beneficiary aligns with your future wishes and estate goals. With lumps of money, you want someone you can trust to distribute it properly.

Term Life Insurance Features

One rule of thumb might be to hold a life policy benefit equal to 15 times your income, but what is right for you depends on your assets, dependents, household income, and debts. Depending on your particular needs, the insurance company you choose will depend on your total wealth. So, what are the features of term life insurance?

  • Flexible. This policy can be adjusted to suit needs or changes in your life, such as medical costs. In some circumstances, the cover holder can apply to increase a death benefit when financial obligations are greater.
  • Cost-effective. The cover holder only needs to pay the cost of the insurance, without needing to pay additional cash value life insurance.
  • Regular reviews. If you're experiencing a life change such as marriage, divorce, death, or a new mortgage, adjustments can be made for the cover holder. This makes sure you aren't under or over-insured.

About to invest in personal insurance? As a financial advisor servicing in Hawthorn, Preston, and Brunswick, we provide reputable, evidence-based services so you can evaluate your financial risk.  

Protect Your Assets With A Financial Advisor in Melbourne

At Dominium Capital, we can help you plan for your future. Whether you're a real estate investor, business owner, homeowner, or are going through a drastic life transition, we can offer personalised financial planning, hold an extensive network of lenders, and always value a strong relationship with clients like you. 

Concerned about premium increases? If you want to safeguard your financial future with personal insurance, we are experienced mortgage brokers in Melbourne with a proven track record of quality support. 

Contact us today for flexible loan options, solutions, and trusted professional guidance to accommodate for your situation. As a private wealth client, you can live the life you envision, without worrying about the impacts of life.

General Advice Warning: This article does not consider your personal circumstances and is general advice only – unless otherwise stated. 

You should not act on any recommendation without considering your personal needs, circumstances and objectives. Dominium Capital recommends you obtain professional financial advice specific to your circumstances.

Any general financial advice is provided by Dominium Capital Financial Advisers Pty Ltd, a Corporate Authorised Representative of Dominium Capital Pty Limited ACN 142 188 510 125 AFSL 461653

More finance news and insights

Learn about the problems we solve for our clients

1. Any financial advice is provided by Dominium Capital Financial Advisers Pty Ltd, an Authorised Representatives of Dominium Capital Pty Limited (ABN 54 513 176) 674 AFSL 461653
2. Any credit & finance advice is provided by Dominium Capital Pty Ltd. Australian Credit Licence 461653
3. General Advice Warning – The information provided is general advice only. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs.