What to know before getting Insurance

When prompted most people can explain why insurance is important. We need it to support our families, replace valuables when they are lost or destroyed, pay for vital expensive medical treatment, keep food on the table, clothes on our back, pay rent and meet loan obligations so we are not left homeless. If you have been to a hospital recently you'll know you even need money for parking.
Even though we know these things most people have inadequate insurance. I believe one of the reasons for this is Insurance has become very transactional. Any day of the week you can turn on the TV, watch an insurance advertisement offering a 10 minute application over the phone, hand over your credit card details and you are done. Alternatively you can apply online, give some basic details, how much cover you want and they will send out your bill along with the PDS in the mail.


While I am not opposed to the fast paced world of information technology or think insurance should be harder to get it does have its draw backs. Firstly unless you make a claim insurance is an intangible service. What you are paying for is a promise. A promise that if something happens to you, you WILL be paid. For a promise to be made there needs to be trust and that is where this process falls short.


For trust to exist there needs to be a relationship and i put it to you that a relationship can not be built in a 10 minute transaction completing a questionnaire. For this reason the public can be skeptical that they will not get paid and the insurance company will find some loop hole. That they are paying too much and getting nothing in return. At Constancy Wealth Management we have recognised this issue and are addressing it with our clients.


We do this in many ways.


Assessing your needs - Insurance is about making sure if something happened to you there would be sufficient funds available. It is important that if you have been spending your hard earned money on insurance premiums at claim time there is enough money paid.


If you are significantly over insured then your premiums may become so expensive you end up with no cover at all when you need it the most.


Researching the Insurance companies - All insurance companies come with a Product Disclosure Statement but honestly how many of them do you read back to back?


Constancy Wealth Management read the Product Disclosure Statements for every Insurance company they compare so the recommended products promise to pay is suitable for your personal needs and circumstances.


Structuring your policy -  Insurance policies can be structured in many different ways.
Linked vs Stand alone, Stepped vs Level, Basic vs Advanced, Inside vs Outside, Index vs Non-Index, Buy back vs Reinstatement, etc.


By structuring your policies to suit your personal needs you can make sure you are paying for what you do need and not paying for what you don't need.


Discussing payment methods - There is a lot of flexibility when it comes to paying for insurance costs. Payments can often be made annually, quarterly or monthly.
If cash flow is still tight some insurances can be held and paid for by Superannuation. This has its limitations so a hybrid ownership and payment method may be suitable.


Scheduled reviews - Our world, lives and insurance companies are constantly changing. What was suitable last year may not be suitable next year or even this year. We make a point to maintain our client relationships so that we can pro actively keep your cover relevant.
If your insurance needs are higher we can help keep you covered. If your insurance needs have decreased we can also help reducing the cost of cover.


We have had scenarios where employees received a promotion and now worked in a lower risk occupation saving them money. Without scheduled reviews this would not of been picked up.


Claims concierge service - In my personal opinion this is the most important service a Financial Planner can offer their clients. If something serious happens in your life and you need to make an insurance claim your Financial Planner can help facilitate this. They will work as an intermediate between yourself and the claims officer to help you organise the information you need and get you paid sooner. By doing this you can keep reduce any additional stress and focus on a fast recovery.
So what is the end result? The end result is you will have

• A trusting relationship with your Financial Planner.
• Trust that your insurance cover will pay when it is supposed to. 
• That you are paying for what you need and not what you don't need.
• That the insurance is affordable and kept up to date.
• Importantly that at time of claim you will have a concierge service ensuring a smoother and faster claims process so you can focus on getting better.

Contact us today through our website for all your Personal, General and Business Insurance needs www.constancywealthmanagement.com.au

What you need to know

Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.


This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information

First off let me say I am not against paying tax. Paying tax keeps the economy moving forwards, funds the socialist side of our government and stops us from experiencing the hardship that parts of Europe have recently endured.


As a financial advisor a big part of my job is optimising my clients’ tax structures. I would like to share with you some of the ways I do that using this two part series


Deductible expenses
Purchases that are tax deductible would have to be the most commonly known way to reduce your taxable income. Depending on your occupation these could include work uniforms, safety equipment, stationary or larger purchases such as work vehicles. The general rule of thumb is for it to be a deductible expense the purchase needs to be a requirement of your job so you may produce an income.
I often get asked close to tax time if someone should purchase tax deductible goods to get a larger tax return. My answer is to think of it like it was on sale. If you need it or were going to buy it anyway then it makes sense. If you are buying it simply because it is cheaper then it doesn’t make much sense.

Investment bonds
Investment bonds are can be suitable for investors wishing for a long term investment at a reduced tax rate. Generally speaking bonds held for 10 full years will have investment earnings taxed at the company tax rate of 30%. This can be significantly lower than the investors’ marginal tax rate. There are rules that must be followed for this to happen so it is best to talk to us first before investing in any bond.

Negatively geared investments
If the cash expense on an investment is more than the investment income received in a financial year it is called negative gearing. The best example of this is a negatively geared investment property. The investor may receive $300 a week rent but the cost of the investment loan, rates, body corporate fees etc. may cost $350 a week. As the cash expenses are more than the income produced the investment is negatively geared.
The benefit of a negatively geared investment property is that the investors’ assessable income for tax purposes is reduced. In the example above the investors assessable income would be reduced by $2,600. The saving in tax could be used to pay down debt or buy another investment.
Negative gearing is only beneficial if there is capital growth. In the example above the investment property needs to go up in value and incur a capital gain when it is sold otherwise the investor is losing money. If the investor wished to increase their living expenses they would consider a positively geared investment.

Australian Shares
One of the great benefits of investing in Australian companies is that they are governed by Australian tax laws. Companies that make a profit can nominate to re-invest or pay dividends to shareholders. These dividends can be unfranked, semi-franked or fully franked.
If they are fully franked that means the company has already paid company tax (30%) on the income. Semi-franked means part of the income has tax paid components and unfranked means no tax has been paid. The benefit to tax paid income is that if your marginal tax rate is higher than 30% you have paid less tax on your dividends. If your marginal tax rate is lower than 30% then you will receive a tax refund. This can be optimised even further through use of strategic investment ownership.

Ownership Structuring
Superannuation, Pensions, Trusts, Companies and Individuals are all taxed differently. Superannuation is concessionally taxed at 15% on investment earnings which is why it is ideal for building retirement savings. Pension accounts receive tax free earnings and once the investor has reached age 60 can receive tax free income. Companies are taxed at 30% on their assessable income and can pay fully franked dividends to shareholders. Trusts are more complicated and any earnings can be taxed at the highest Marginal Tax Rate. For obvious reasons this is not ideal but can be beneficial to distribute income, capital gains and tax credits to beneficiaries.
This can be challenging to fully understand how each are assessed and taxed but with challenge always comes opportunity. Your Financial Planner in combination with a preferred Accountant can discuss how the use of different ownership structuring and tailor a package to suit you. The benefit of this is optimised tax structuring, income distribution and asset protection.

Superannuation
Unfortunately what I hear a lot is that people do not trust Superannuation and are not confident it will exist in the future. Superannuation is not an entity. You do not invest in Superannuation and your S.G. contributions are not owned by Superannuation. Superannuation is a tax structure. It is the Australian Government saying we want people to be more self-sufficient in retirement by investing more during their working lives.
The government has put in many incentives to do this with the main one being concessional tax treatment. There are benefits to these tax concessions from the start of your working career and throughout your retirement. If you are a long way from retirement the concesionally taxed investment returns will grow by a significant amount over your working life. If you are close to retirement and still do not have enough savings concessional contributions makes it easier to boost your retirement savings. While you are retired the concessional or tax free environment will ensure your funds last longer.
In return for these tax savings the investment have to be used for the sole purpose of saving for your retirement. No one wants to work forever and everyone working in Australia has Super. For this reason every person in Australia needs to talk to a financial planner about how they can maximise their retirement potential.
 
Estate Planning
They say there are two guarantees in life; Death and Taxes. Unfortunately even after Death taxes still go on. Did you know that after you pass away someone must complete a tax return for that financial year on your behalf? Depending on where the money is coming from, who it goes to, when and how will affect the taxation treatment.
By planning your estate distribution and putting legal contracts in place we can optimise any tax implications maximising how much is left to your family. You can also nominate when your beneficiaries receive funds from your estate and under what conditions. This is ideal for parents of very young children, mixed families and caring for people with special needs.

What to do next?
This blog has a very important purpose which is not to provide you with financial advice. I have not taken into account your personal circumstances, goals, time frame or cash flow situation.
What I want you to take away is that you need to challenge what you already know. Learn how you can do the same thing better leaving more money in your pocket.
Accountants report your tax situation, Financial Advisors plan it. Talk to the experts at Constancy Wealth Management by visiting their website. www.constancywealthmanagement.com.au





What you need to know


Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.


This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.