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5 things you need to know about life insurance

Five things to know about life insurance

Life insurance offers important protection for millions of Australians, making it critical to understand the benefits as well as the latest news.

Life insurance comes in many different forms such as life cover, Trauma/Critical illness insurance as well as Income Protection and Total and Permanent Disability. Each of these play an important role in protecting you and your loved ones when it is needed most.
Unfortunately many people remain unsure how much life insurance they need. Throw in constant regulatory change and many Australians may not have the cover they assume they have or some may even be holding back on purchasing life insurance.

Below are 5 things we think you need to know about life insurance.

# 1 : People making life insurance claims are younger than you think

The average claim age for life insurance is only 66 years for men and 63 years for women, according to data provided by life insurer Clearview.
This shows the importance of insuring against the unexpected, whether that be a terminal illness or death due to an accident or illness.

# 2: Insurance claims involving advisers are more likely to be accepted

A comprehensive 2016 life insurance survey by the corporate regulator, Australian Securities and Investment Commission (ASIC), found claims were denied in just 7% of claims when a financial adviser was involved.
Life insurance claims through a superannuation fund (known as group insurance) were declined in 8% of cases while direct life insurance (sold through a call centre or over the internet) were declined in 12% of cases. One insurer via direct sales declined 29% of claims while one insurer via a superfund declined 23% of claims suggesting a skilled financial adviser can be invaluable not only to ensure you have the right amount of cover in place but to ensure the cover is provided through a reputable insurer with a good claims record.

# 3: Most life insurance claims are processed quickly

More than 130,000 life insurance claims were processed in 2017-2018 by the major insurers that have signed up to the new life insurance code of practice.
The industry reported that 89% of income related insurance claims were decided within 2 months whilst 92% of non-income related claims were decided within 6 months.

# 4: New legislation may close your insurance if it’s attached to super

From July 1, 2019 super accounts with insurance that are inactive for 16 months have had their insurance cancelled.
Many superannuation funds automatically include life insurance, unfortunately many people are unaware that they have it or have not taken the time to consider whether the amount of cover is sufficient.

# 5: Life insurers want a regulatory overhaul so they can offer rehabilitation benefits

Employment provides people with the money they need to support their lifestyle. However, those who are incapacitated and unable to work lose more than just an income, it can also dent their self-confidence and happiness.
Life insurers are lobbying for change to legislation which would allow them to fund treatment for Australians at risk of long term incapacity where they are not covered by private health insurance or stuck on public healthcare waiting lists.
Research suggests such reforms could benefit up to 10,118 people per year while 87 people could be prevented from becoming totally and permanently disabled. Early intervention by insurers could also cut return to work times from 18 to 13 weeks.

Income Protection under super during Covid-19

As the economic impact of Covid-19 continues to emerge, one thing superannuation members must be careful of is how their Income Protection policies will be affected should the need to claim arise. This is especially important for clients who have Income Protection which is owned under super. This applies to both group insurance and retail Income Protection policies that are wholly paid for from superannuation.

To have an Income Protection benefit (sometimes called salary continuance for group cover) paid under super, that member must meet a condition of release. For Income Protection policies that condition of release is ‘temporary incapacity’. Temporary incapacity means that the member has ceased employment due to injury or illness. This means that if the member/insured person is unemployed at the time of suffering illness or injury they will not meet the ‘temporary incapacity’ condition of release as the illness or injury is not the reason for ceasing employment. And therefore no claim can be paid.

With unemployment levels expected to rise significantly due to Covid-19, this may impact a number of people.

Most retail insurers now offer the option of paying a small portion of Income Protection outside of super. This means the should the need for a claim arise the superannuation trustee does not have to get involved nor does the insured person have the meet the conditions of release.

Whilst there are both advantages and disadvantages to owning insurance through super, it is important to make sure the policy is set up correctly.

. The information is general in nature and should not be considered as personal advice

Coronavirus and Life insurance

As the well know coronavirus sweeps across the world, it continues causing major disruptions to the way we live. Given the amount of enquiries we have had from existing clients as to whether they would be covered, I thought I would clarify a few points to give both clarity to existing clients and people who are currently searching for the right Life Insurance, Income Protection etc for their needs.

Protectinsure works with a range of life insurance companies who have clarified their position in terms of what is and what isn’t covered. One clear point they have made is that retail life insurance policies do not have an exclusion on pandemics. Any exclusion that applies to a policy is agreed to by the client before the policy starts by way of signing an exclusion letter (otherwise known as a special acceptance letter). This applies to all retail risk insurance policies including Life Insurance, Income Protection, Trauma insurance, TPD insurance and Business Expenses insurance.

For Income Protection policies one thing to remember is the most common waiting period is 30 days. Whilst existing retail policies are covered for coronavirus, any new policies may be subject to exclusions and new applicants may be required to disclose travel plans to affected countries as this may impact on their risk assessment.

This information was provided to Protectinsure by a variety of insurers. This is general in nature.

The End of Agreed Value Income Protection Policies

Whilst many people may not understand the importance on Agreed Value Income Protection, it is an important feature especially for self-employed Australian who tend to have fluctuating incomes.

Disability insurance (commonly known as Income Protection) in Australia has recorded losses of over $1 billion over the past 12 months across all insurers. This takes the total losses to over $3.4 billion in the last 5 years.

The Australian Regulatory Authority (APRA) has proposed the following changes:

-Avoiding offering Income Protection policies with fixed terms and conditions of more than 5 years.

-Ensuring effective controls are in place to manage the risks associated with longer benefit periods

-Ensuring Income Protection benefits do not exceed the policy owners income at the time of claim

-Ceasing the sale of agreed value Income Protection policies

APRA have said that there is now a genuine risk that risk insurers may start withdrawing from the market hence the proposed changes.

What is Agreed Value Income Protection?

Agreed value means that the insurer has endorsed your insured value (monthly benefit amount) so when it comes claim to claim there is minimal to no financial information required. The insurer will go on your income at the time of taking out the policy. Of course a medical professional will still have to sign off that you cannot work due to injury or illness. The other option is what is called an Indemnity contract. This is the most common contract on Income Protection policies and means that the claim amount will be limited to 75% of your income for the last 12 months (24 or 36 months for some insurers). This can be a problem for clients who are self employed and have an income that fluctuates yearly as the previous 12 months may be less than what their insured amount is. The indemnity contract will be the only option available from April 1, 2020 if APRA’s changes go ahead.

What can you do?

If these changes go ahead it’s highly likely that Agreed Value policies that went into force before March 31 will stand. Agreed Value Income Protection is not right for everyone although if you haven’t had your policies and financial situation reviewed recently now may be the perfect time.


This information is general in nature and should not be considered as personal advice

The Downfalls of Group Insurance through Super

Whilst default insurance through super has its advantages, it also has many downfalls that most people are unaware of.

Recently I spoke to a new client who was perplexed that his Salary Continuance  (similar to Income Protection) through Qsuper super had changed from a benefit period of 3 years to 2 years. They also increased their premiums considerably. Unfortunately for my client there was nothing he could do other than to move the insurance elsewhere as the group cover through super can be changed anytime by the insurer who has a contract with that fund. Whilst he is still healthy and was able to seek financial advice from an insurance broker like myself, not everyone is so fortunate as they may have health problems which prevent them from being able to move their cover leaving them worse off with no option to move to a better product. In this case he was able to take out a fully underwritten Income Protection policy with a benefit period to age 65 for a slightly cheaper premium than his Qsuper policy which only covered him for 2 years.

Retail Income Protection which is purchased through an insurance broker/financial adviser can also be paid for via super if this is the preferred option for the client. All Income Protection policies are underwritten before going into force and cannot be changed by the insurer as long as the premium continues to be paid. They are also non-cancellable and cannot be cancelled by the insurer except if they are not paid up to date. They are also generally tax deductible outside of super and have a maximum benefit period up to both 65 and 70 unlike Salary Continuance through super which generally only pays for a maximum of 2 years.

Whilst Life & TPD insurance through super normally provides a small amount of protection it is not enough when you consider the cost of raising a child and the average Australian home loan amount.

Trauma insurance is a policy that pays out a tax free lump sum amount on the diagnosis of a trauma event such as cancer, stroke, heart attack etc. Trauma cannot be taken out within super but can be attached to retail life insurance policies whether they are paid for via super or personally by the insured.

Whilst group insurance does have a role to play protecting people who otherwise wouldn’t seek financial advice, it has many disadvantages and is inferior to a fully underwritten retail life insurance policy.

If you have insurance through super and would like a review please give us a call on 1800 737 926 or email

Insurance Broker Brisbane, Gold Coast & Sydney

As we head into the future, Australia’s life insurance market is evolving. Cities across the country like Melbourne & Brisbane are growing, with more people finding themselves with incomes worth protecting. People realise the financial risks posed to their family in the event life takes a turn.

The problem: It’s not all good news. More people are buying life insurance and have the income to protect their family, yes. But they’re not all spending it wisely. One study by Rice Warner Actuaries in 2011 estimated that 95% of Australians didn’t have life insurance of a satisfying standard. There are a few trends that are making financially smart people go for the wrong option. One of the biggest reasons is how they go about choosing the packages they pay for.A study from Noble Oak done at the start 2017 found that more people are getting life insurance advice from the internet. A third of Australians get their information strictly from the internet, while 25% follow friends and family members. Just a quarter of life insurance customers are using real financial advisors like brokers. On one hand, it’s a good thing that people are willing to take direct control of important financial decisions. On the other hand, it doesn’t always work out great for them. The Life Insurance Customer Group recently published that people who do go directly online for life insurance without a broker get rejected from claiming on their policy 71% more often than those who use advisers.

The solution: It’s no small issue that more Australians are ending up under-insured or paying for coverage they don’t need. The boom in direct life insurance sales is helping some, but putting a significant amount of people at risk. For those people and for the people who aware of the risks of going directly to providers, life insurance brokers could be exactly the kind of friend they are looking for. From the head of the family looking to protect their loved ones to the business owner enjoying the growth of industry in urban centres like Brisbane who wants their key people looked after, there are advisers suited to helping life insurance customers of all kinds. Let’s take a look at the benefits and why they make brokers a much wiser choice than buying direct.

Avoid under-insurance: Price is a significant concern when looking at the different levels of coverage available. When people hear that going for direct insurance deals can be cheaper, they might be tempted to ignore the implications and take what deal they can get. The reason these deals are cheaper, however, is often that they don’t provide the coverage that customers really need. Any benefits of a cheaper deal evaporate when a claim is rejected because you weren’t covered when you thought you were.

When you buy with the advice of a broker, the only reason you are going to be paying more is that you’re going to be getting the right level of cover. Good life insurance brokers won’t try to tempt you with low-cost deals that you get no use out of. In fact, some research shows that brokers can often find better deals thanks to the different rates they often get from providers.

Focus on the consumer: It always pays to be sceptical of the services you pay for, including life insurance. Businesses are profit driven and we don’t want to assume that a consumer will be prioritised over profit. For brokers, their profit isn’t based on selling you something and leaving. It’s based on providing advice not just when you’re buying insurance, but long after. A broker will make sure that you’re happy with the deal well after you’ve already signed up and will help you find alternatives if your needs change.Brokers represent the options different companies provide, but they work for you, not the companies. They have one objective and one profit motive: your best interests.

Interpreting the jargon: 1/3rd of Australian households don’t have life insurance. There are some who don’t think about it all that often, but more are aware of the need for protection but simply unable to properly navigate the market. Direct life insurance sellers are making some efforts to simplify the jargon but it’s not enough and in doing so, they risk missing the intricacies of a policy that could prove to be a deal-breaker.

Advisers like brokers are vastly more experienced at accurately translating jargon to make things much easier to understand for customers of all kinds. Brokers are easier to get in touch with, too, answering personal queries and specific circumstances where direct providers tend to falter.


Knowing you, knowing needs: One of the biggest reasons that people end up with inadequate coverage is because of the nature of direct insurance deals. A lot of providers taking that route aren’t as thorough when it comes to finding out your income details, your attitude to risk, and things like your medical history.A life insurance broker will want to know these details because they know how it impacts your needs and the different deals on offer. This includes the provision of policy riders like double indemnity, which has the insurer paying out double to your loved ones in specific circumstances. Most buyers don’t know that many of these optional riders even exist.

When to use a life insurance broker: The benefits of using brokers are clear. If you’re starting a family and you need to know that they’re going to be looked after, you should use them. If you have a specific job or lifestyle brings about a certain level of risk and you’re concerned you might need specialised cover, you should use them. If you’re running a business and you rely on key people and losing them could negatively impact the business, you should use them. There’s a lot more to gain than there is to lose by getting some expert advice on your insurance choices.

Contact The Insurance Quoter today. 1800 737 926

The Enduring Relevance of Trauma Insurance

Trauma insurance provides much-needed financial protection against serious medical conditions. Jeff Scott traces the origins of trauma cover and highlights the value it provides cancer sufferers and their families.

Trauma insurance was first introduced in South Africa in 1983 by Dr Marius Barnard to give people much-needed financial protection against serious medical conditions like cancer, heart attack, stroke or an accident.

In the 34 years since, trauma insurance remains just as important as ever.

Looking specifically at cancer, it’s a disease that does not discriminate. It can strike anyone, at any time.

Anyone who has battled cancer or watched a loved one suffer from the disease knows how destressing it is. From diagnosis to treatment to remission (for those who live to be cancer-free), the process is often long and painful which is why appropriate trauma cover is so important.

Encouragingly, the overall cancer mortality rate continues to fall due to early detection and more effective treatments but this means more people are living with cancer.

There are numerous forms of cancer treatments including surgery, chemotherapy, radiotherapy, hormone therapy, immunotherapy and targeted therapy. These treatments can be used in isolation or in conjunction with one another to try and reduce, minimise or eliminate cancer.

In the past 25 years, the five-year cancer survival rate has improved significantly to 68 per cent for men and 69 per cent for women.

However, the survival rate varies depending on the form of cancer.

For example, men have a 95 per cent survival rate for prostate cancer and women have a 90 per cent survival rate for breast cancer but the survival rate for lung cancer (14 per cent for men and 19 per cent for women) and pancreatic cancer (8 per cent for men and women) is dramatically lower.

It’s estimated that the average personal, financial cost of cancer is approximately $114,500 although the financial burden of brain cancer and leukaemia is much greater; $325,000 and $258,000 respectively. On the other hand, the average financial cost of prostate and breast cancer is around $64,000 while melanoma costs around $32,100.

Financial costs, which include treatment and medicines plus both loss of personal income and loss of income for spouses/carers, are a crude way to look at the impact of cancer which also has an enormous psychological and social impact but as Dr Marius Barnard famously stated in 1983: “A medical doctor can a repair a man physically, but only insurers can repair a patient’s finances”.

Fortunately, trauma insurance policies issued in Australia today have a much wider application than the original policies issued in the early 1980s. The first policies were designed as a form of health insurance to cover medical bills and doctors’ fees but individuals today enjoy greater benefits and choice.

Lump sum payments can be used to pay for non-traditional treatments, modifications to their residence or to compensate a spouse for taking time off work to care for a sick partner.

ClearView LifeSolutions continuously monitors and improves its cancer definitions and exceeds the Financial Services Council’s standards for Minimum Medical Definitions.

The statistics

  • Around 134,000 Australians will be diagnosed with cancer (72,000 men and 62,000 women) in 2017 and around 48,000 people will die from cancer.
  • From birth to age 24, the top 3 diagnosed cancers are leukaemia, lymphoma, and brain cancer. In this age group, over 1,600 new sufferers are diagnosed each year.
  • The top 3 diagnosed cancers for people between the ages of 25-49 years are breast cancer, melanoma and colorectal cancer. In this age group, there 16,000 new sufferers are diagnosed each year.
  • The top 3 diagnosed cancers for people between the ages of 50-64 are breast cancer, prostate cancer and colorectal cancer. In this age group, there are about 38,000 new sufferers are diagnosed each year.

– Jeff Scott is head of product at ClearView Wealth.


“Cancer in Australia 2017 – In Brief”, Cancer series number 102, Australian Institute of Health and Welfare, Canberra, Cat. no. CAN 101.

“Cancer Council – A guide for people with cancer, their family and friends – Treatment” – Cancer Council of Australia, August 2016.

Cost of Cancer in NSW – A report by Access Economics Pty Limited for The Cancer Council NSW, April 2007.


Brisbane is Booming

Brisbane’s Booming Economy

Brisbane is currently experiencing a step-change in economic activity. It’s fast becoming what many are calling “Australia’s new world city,” indicating the extent of the optimism surrounding the city’s future.

From the downtown area, you can see the evidence of the city’s remarkable growth all around you. There’s an enormous amount of activity here – thousands of people rushing about to get to appointments, cranes and diggers all over the place building up the city’s infrastructure, and an impressive skyline that would be more suited to a metropolis twice the size.

Back in 2012, a prescient report by Jones Lang LaSalle predicted that Brisbane would experience 5 percent growth annually for the rest of the decade until at least 2020. Investment is hot, and since the global economic recovery began to really gain steam in 2015, activity has picked up even more. GDP is expected to grow at more than 4.7 percent annually for the next three years, implying that Brisbane will outperform some of the most dynamic cities on Earth, including Hong Kong and Singapore.

Much of this economic growth is being driven by the business community. In recent years, entrepreneurs and business owners like you have flocked to the city in search of making money. All this activity is predicted to generate an additional 440,000 in Queensland, as well as more than 200,000 high-quality, professional jobs by the year 2021.

What’s happening in Brisbane is similar to what occurred in Silicon Valley and other economic hubs in the twentieth century. The city is feeding on its own success in a virtuous cycle, and business owners stand to benefit. As the city’s economy expands, it attracts more and more talent from the surrounding region and abroad. This pool of talented people then begins earning high incomes which generate higher demand in the local economy. Thus, not only do businesses get access to the talented people they need, but they also get wealthy consumers to buy their products and services.

The Risks Facing Businesses In Brisbane

With all this activity in Brisbane and the flurry of new business startups, there’s a need for reputable insurance providers. The dramatic increases in population and wealth need to be matched by increases in insurance provision and coverage. Though things are looking great for the largest city in Queensland right now, there are still risks facing individual business – and these risks need to be mitigated.

One of the risks facing businesses in Brisbane is the loss of key people. Though it’s unpleasant to think about, people can get seriously injured or die at any time, and this can jeopardize the operations of a company. There’s a need, therefore, to get the right insurance that can provide protection in such an eventuality. Business will only boom in Brisbane if companies find policies which provide payouts to beneficiaries should someone they need in their organization lose their life, or suffer a debilitating injury or illness.

Another risk has to do with the owners and managers of businesses themselves. The nature of the economy in Brisbane is changing in ways that make individual insurance more important than ever. Just like the rest of the global economy, Brisbane is experiencing a dramatic growth in its independent workforce. There are more freelancers, contractors, and solo-enterprises than ever before, meaning that many more individuals require their own insurance coverage. Individual businesses, personal enterprises and other independent agents in the economy can no longer rely on firms to protect them from the vicissitudes of commerce: they need their own insurance policies to stand up for them and give them peace of mind.

In practice, this means finding insurance policies that provide business owners with protection at a personal level. What would happen if you suddenly got sick or injured and couldn’t work at your business? Who would pay the salaries, the rent, interest payments on debt, utility bills, equipment maintenance and so on? If you’re a small enterprise looking to locate in Brisbane, this is precisely the type of issue you need to consider.

Tips For Finding Great Insurance In Brisbane

The good news is that Brisbane has high-quality local insurance brokers, able to meet the needs of practically any business, no matter how large or how small. Although the city is one of the most attractive business propositions in the whole of the developed world, it’s unique trading position and demographics open you up for risks. As a result, it’s essential to find the best insurance deal in the city. But how? Take a look at these tips.

Know Your Risks

When insurance brokers come up with a price for insuring you, they’ll use as much information about your business as possible. They want to know whether your premiums will cover the risk your business presents and whether they’ll make a return. That’s why it’s essential to have a good understanding of the risks that you face. Knowing the risks you face ensures that your business is priced accurately and that you don’t pay more for insurance than you need to.

Different businesses in Brisbane face different risks. If you have a history of illness, or there is illness in your family, your business may also be in danger, especially if there is nobody available to replace you and continue your work if you have to go on sick leave.

If you’re setting up a joint-enterprise in a knowledge sector, such as education, software, professional services or technology, then your risks are different. You’re worried about losing key people from your organization. Talented people in your organization could get sick and might be hard to replace on short notice. If you rely on these people for the day to day operation of your business, then it’s essential that you take out keyman insurance – a type of insurance that protects you if a key person in your organization is no longer able to work.

Choose Insurance You Need To Cover You

You never know when disaster might strike, and so you need to find insurance products with adequate coverage.

If you’re a business in Brisbane that relies on a key person or key people, then you might want to consider keyman insurance. This type of insurance is designed to protect an organization from the loss of a key person needed to keep the company running.

The amount of keyman insurance you need depends on the type of business you run, but in general, the more keyman coverage you have, the better. Usually, it’s a good idea to start getting quotes for policies in the region of $100,000, $500,000 and $1 million. The next step is to think carefully about how much coverage your business is likely to need when operating in Brisbane. What would be the direct cost of losing a keyman? Could that person be replaced or substituted with freelancers? Or does hundreds of thousands of dollars ride on their being able to turn up and work?

Equally, if you rely on yourself, then you might consider business expense insurance. This type of insurance pays out in the event that you can’t work due to sickness or injury. Business expense insurance covers you for all the expenses your business faces, including rent, salaries, and utility bills. The last thing you want is to find yourself in debt to finance your business while you’re trying to recover from an injury or illness.

Find A Broker You Can Trust

Brisbane is a bustling metropolis, full to the brim with new businesses and exciting new opportunities. As a result, it’s essential to find a broker you can trust. You need somebody with enormous experience and skill in the field and who will provide you with the greatest value for money. Fortunately, there are plenty of guides out there for finding great local insurers, meaning that you never have to go to into insurance negotiations blind.

Try finding an insurance broker operating in the Brisbane area who is willing to provide you with a free insurance review. There’s no need to pay just to get a simple quote. You want to have access to price information so that you can compare all your options.

Find A Local Broker

Finally, it’s important to find a local broker who is able to take you through the various risks facing businesses in Brisbane. Many insurance companies will rely on their national brand to get customers, but they might not be in the best position to accurately price insurance for your business if they don’t have expert knowledge of the local economy and the risks facing businesses today. It’s better, therefore, to look for a broker with local expertise.


Brisbane is booming, and it’s having a significant knock-on effect on the insurance market. With a growing number of small enterprises in the city, there’s a need for quality insurance that can protect them against losing key members of their team to sickness and injury. Finding the right keyman and business expense insurance for your business is, therefore, essential.


What is life insurance and why you need it?

The best way to understand life insurance, and how important it is, is to imagine what would happen to your family and their finances in the event that you or your partner were to die unexpectedly or become disabled and unable to work.

Think about all of the financial commitments you have in your life. Like many of our clients, there a probably a few large expenses that spring to your mind! Mortgage repayments, car or personal loan repayments, credit card debts. And then there are your dependents. You might have your children’s care and education costs to consider or your parent’s aged-care living expenses. And on top of that, you probably have a few long-term financial goals, like a retirement fund you and your partner are saving towards.

If you were suddenly out of the picture what would happen to all of these financial commitments and goals?

Who would be able to pay all of your debts?

What would your family have to sacrifice?

Although it’s not a scenario that many of us like to think about (and for good reason) being adequately prepared for the worst can save your family from years of financial hardship in the long run. That’s why life insurance is something that everyone should think seriously about.

This article is designed to explain everything you need to know about life insurance.

Specifically, we’ll discuss:

The different types of life insurance available
How to work out how much cover you need
What to consider when applying for life insurance and
How life insurance premiums work

So what is life insurance?

Life insurance is an umbrella term that’s used to describe a range of products that can provide financial support and cover for your family in the instance of your death, disability, serious illness or injury. The amount of cover and the nature of this financial assistance can vary greatly depending on the type and level of insurance cover you have.

Many people take out life insurance to provide security for large expenses such as their mortgage repayments, but life insurance can also be used to protect your family’s quality of life by covering smaller, ongoing expenses such as bills, general living costs and even costs associated with your death that your family may incur, such as the cost of the funeral.

Life insurance can also be used to ensure that your family will continue to receive adequate income in the event that you are seriously injured or ill and are unable to continue to work.

Types of cover

There are several different types of life insurance available, and it’s important to understand what each offers. Often these different products are packaged together, so you should always check what is included in your life insurance when applying.

  • Life cover
    There are several different types of life insurance available, and it’s important to understand what each offers. Often these different products are packaged together, so you should always check what is included in your life insurance when applying.
  • Total and Permanent Disability (TPD) Insurance
    TPD insurance is very often paired with life cover, but instead of covering you in the event of death, it offers cover in case you are seriously and permanently disabled and no longer able to continue to work and support your family. Different insurers have different definitions of what constitutes a ‘total and permanent disability’ so it’s important that you read and understand the terms and conditions that your insurance provider offers.Generally, there are two different options. For some products, TPD insurance can only be claimed if you can no longer work at all in any occupation. For other products, TPD is claimable if you can no longer work in the specific occupation that you did previously. This will be established when you take out your insurance.
  • Income protection
    Income protection (or salary continuance) is a way of ensuring that you and your family will be financially covered in the event that you are seriously ill or injured and unable to work for any period of time. Like TPD cover, insurance providers have different definitions of what is considered a disability to work, so you need to check carefully what they will and will not cover.Unlike TPD insurance, however, income protection can be claimed even if you are only unable to work for a limited period (such as 6 months or a year), and you do not need to be permanently unable to work to claim. Income protection is a way to ensure that you continue to receive ongoing income to cover your ongoing expenses, even if you are not working. For this reason, income protection is highly recommended for small business owners, and self-employed people, but it is useful for anyone who relies on an income.
  • Trauma cover
    Trauma cover (sometimes called ‘critical illness’ cover) is used to cover you in case you develop a specific illness or condition (such as a stroke, or cancer). In the event that you do develop this illness or condition, you will likely find it difficult or impossible to keep working. Trauma insurance will pay a set amount to help you and your family through this time.

How much cover do you need?

Working out how much life insurance cover you need is a complicated task, and it requires a lot of research, and personal consideration to determine the best options for your circumstances.

As a very simple equation, you need to try to answer the following two questions:

How much money would my family have access to if I were out of the picture?
How much money would they need?

The gap between these two amounts is a good approximation of how much life insurance cover you would ideally need. But you also need to think about what you can afford.

Working out the answers to both of these questions is not easy, though, and you need to consider many other factors to have an accurate idea of your financial position.

  • What you should consider
    You need to think realistically about your family’s financial situation, and how it would change if you were suddenly out of the picture.

    How much money do I currently have in savings? (Include superannuation, shares and any investments).

    How much cash would my family need to continue living at the same quality of life? (think about mortgage repayments, childcare costs, your other bills)

    How much income would continue to come into my family without my contribution?

    What additional expenses could arise as a result of my death or disability? (Think about funeral costs or the prospect of ongoing medical bills and palliative care.)

    Would other family members be able to help support your family financially?

    Do you have paid leave entitlements at work that would be paid out on your death?

    What other forms of financial support might be available to you or your family? Remember that you may be entitled to worker’s compensation or government payments if you become disabled or seriously injured. Accidental death insurance, which is a life insurance product may also be paid to your family if you die in an accident.Many insurance providers offer insurance cover calculators to help you work out how much cover you need. Or you can always discuss you options with one of our consultants who will talk you through the whole process.

  • Who needs to be covered?
    Another important thing to consider is who needs to be covered in your family. Although it may seem like only the main income earner needs to be protected, you need to carefully consider whether this is the case.Consider a situation like that of Mark and Sara. Mark works full-time and Sara works part-time while also looking after their 3 children for most of the week. Even though Mark is the main income earner, if something were to happen to Sara, Mark’s income alone would not be enough to cover their mortgage repayments, as well as the additional cost of full-time childcare. They decide they both need life insurance to protect their family.
  • Superannuation and life insurance
    Once you’ve worked out the appropriate level of life insurance you need, it’s worth taking a look at your current superannuation. Many super funds include life insurance, so it’s worth checking what you are already covered for.
  • Review your life insurance regularly
    For many people, the amount of life insurance they need will change a lot over their lifetime. If you take out a new mortgage or have children the amount of cover you need will increase quite a bit! Similarly, if you have just paid off your mortgage, or your dependents move out of the home, you might find you can reduce the amount of cover you need.It’s important that you have your life insurance cover assessed regularly so that your policy can be changed and updated to match your changing circumstances.

Applying for life insurance

Once you’ve decided on the type and level of life insurance you would like, you can apply for a product that meets your needs.

Applying for life insurance cover is a simple and straightforward process. However, it’s important to know that when applying for any life insurance product, you will need to provide the insurance provider with some personal information on your health and lifestyle. If you have a serious, or terminal pre-existing medical condition, you may not be able to apply for life insurance. Some insurance companies will need you to undertake a medical examination before you take out a policy.


For any life insurance product, you’ll be paying premiums. Most insurance providers will allow you to pay your premiums monthly or annually so talk to one of our consultants to find out what will work best for you and your budget.

Usually, life insurance premiums will become more expensive the older you get. This is a matter of statistics, as insurance companies expect elderly people to be more likely to make a claim on their life insurance than young people.

Because of this, when applying for life insurance, you’ll often be given the choice of stepped or level premiums, so what is the difference?

  • Level premiums:
    Level premiums are set at a fixed rate that will not increase as you get older, although they may still increase with inflation and additional insurance provider’s fees. Level premiums will normally be more expensive than stepped premiums, at least when you first take out insurance, but because they do not increase with your age, it’s easier to plan for your future and control how much you’ll be spending later. Often level premiums will work out cheaper in the long run.
  • Stepped premiums:
    Stepped premiums will go up each year as you get older (like steps) but because of this, they will usually be cheaper than level premiums, at least in the beginning. If you are thinking of choosing this option, you need to think realistically about how long you are likely to be paying your premiums. You might save money for a little while, but if you’re stepped premiums end up much higher than a level premium it might have been wiser to have selected a level premium all along.


It’s easy to see why for many clients, life insurance is one of the most important aspects of financial planning. No one wants to imagine a situation where their family is left in debt or financial hardship. Life insurance offers peace of mind that if the worst were to happen, your family would not have to worry about money or their financial future. With the appropriate life insurance cover, your family will be financially secure no matter what.

Keyman Insurance: A Definitive Guide (Updated 2016)

If you’re like most of our clients, you’re a busy business owner running a growing and profitable business.

You have a reliable team of employees who are as passionate as you are about going to work and a work culture that breeds positivity.

But there are one or two employees whom your company heavily relies on.

This might be your co-founder, your head of marketing…

…it might even be you.


What would happen if you or that person were to die suddenly or become critically ill?

How long would your company survive?

A morbid thought, granted, but it’s one so many businesses overlook…

And it can cost them dearly.

It’s not secret that as a business owner, you need to do everything you can to protect your company.

(If not only for you but your employees, too)

But how do you protect your business from going under in times of death or critical illness?

Keyman insurance.

In this comprehensive article, you’ll learn everything you need to know about keyman insurance.


  • What keyman insurance is, why you need it and how to find the best price available
  • The potential tax ramifications to a business that receives proceeds from key man insurance
  • What you need to know before applying for keyman insurance


Let’s get started.


What is Keyman Insurance?

We’ve all been there:

We’re doing everything we can to run and grow our businesses, focusing on the urgent and important activities that come with such a responsibility.

Prospecting, hiring employees and servicing your clients comes at the highest priority…

…and non-urgent but important tasks—like researching keyman insurance—can easily fall by the wayside.

While many business owners are unfamiliar with keyman insurance it’s actually pretty simple.

Keyman insurance (also known as a keyman insurance policy, key person or key employee insurance) is an insurance policy that is taken out by a business to cover an important individual within a business.

This is often a key partner, executive or employee whose life is integral to the day-to-day running of the company and whose death would create substantial financial hardship for everyone involved.

If that key person were to pass away or succumb to illness, but the company had taken out keyman insurance, proceeds from the policy would be paid to prevent irreparable damage to the company.

Keyman insurance is popular with many business owners for an obvious reason: it affords another option other than bankruptcy.

While no amount of money in the world can replace the death of a valued employee, it can buy the peace of mind that your company’s future won’t be affected because of it.


Who Can Be Considered a Keyman?

Anyone in your company can be considered a key person, but generally, key people are individuals whose skills, knowledge, experience or leadership are important to your business’ profitability.

Granted, every individual employed at your company plays some role in how much money is brought in, but generally, keyman insurance will only be taken out by the person who runs the entire operation.


What Can Keyman Insurance Be Used For?

Keyman insurance does more than just protect your company and retain precious employees; it covers many of the costs that are associated with the day-to-day running of a company.

Here are just some of the ways keyman insurance can be used:

  • Recruitment, selection and training of new employees. We all know how expensive onboarding new employees can be. As Jason Hesse writes in Forbes, “The contrast between hiring just the one employee and hiring when you’re a larger company is striking.” We probably don’t need to tell you that losing a key person is costly, but with keyman insurance, the costs of hiring and retaining a suitable replacement become less of a financial concern.
  • Covering expenses. A death of a key person can send your company into turmoil. There are daily expenses to cover, bills to pay and debt repayments to be made (the last thing you need at a time of crisis is wolves at the door). With keyman insurance, you’ll have the peace of mind that all the day-to-day running costs of your business are covered, leaving you to get back to what you do best: running and growing your company.
  • Provides funding for the restructuring of your business. With the passing of a key person, a complete restructuring of a business is often required. And, like recruitment, this can become a costly expense. But with keyman insurance in place, you can secure new partners without the need to shut down your business.
  • Buy the stock from the deceased owner’s estate. Imagine you’ve co-founded your company and one day, your co-founder becomes incapacitated or worse, passes away. What would his or her surviving family members do with your co-founder’s share of the company? Would they hold onto it, or would they cash it in? Having keyman insurance puts you in a position to compensate them fairly while retaining full ownership of the company you helped build.

The profit your business generates is its lifeline…

…and protecting those profits at all costs is one of the wisest investments you can make.


When Can I Use Keyman Insurance?

Let’s imagine for a moment you’re running a digital marketing agency.

Most of your company’s revenue comes from “John,” your number one salesperson.

This is because John has many valuable connections in the online space and knows how to close the higher-end deals.


If John was to become critically ill or die suddenly—would your business survive?

This is an uncomfortable question to answer, but it’s one every business owner must consider (especially when your company and your employees’ livelihoods are at stake).

John often generates at least 50 percent of the agency’ sales and is critical to the business’ continued success.

In addition to this possibility, you recognize you need to reward his performance so that he isn’t tempted to leave the company and work for a competitor.

You don’t currently offer a retirement plan for your employees, but you would like to provide John with a supplemental income stream—if he stays with the agency, long-term.

John is currently 40 years old and in very good health.

What would you do?

One solution would be to invest in keyman insurance.

Here’s what that would look like:

You estimate it would take two years for John’s replacement to be trained and build a highly-nurtured pipeline of prospects.

To address your need to reward and retain John, the agency’s legal, tax and financial advisors also draft a formal business agreement for supplemental benefits.

If John should die before receiving any retirement income, the business promises to pay a $500,000 survivor benefit to his beneficiary.

Using the key person life insurance strategy, the agency is able to prepare for the financial challenges which would result if John were to suddenly pass away.

For a manageable annual premium, you would be able to immediately secure the financial stability of your business. Moreover, you would be able to provide a substantial incentive for John to continue working at the agency.


What Types of Keyman Insurance Are There?

There are two basic types of keyman insurance, each covering different areas.

The type of policy that’s the right fit for your business will often depend on what you want to achieve with the policy, and of course, how much budget you have.

That’s why we recommend you speak to a consultant to help decide what’s right for you and your business.

Here’s what you need to know:

  • Buy-Sell Insurance. Also known as a buy-sell agreement or buyout agreement, buy-sell insurance is a legally binding agreement between co-owners if a business covers the value of shares in their company. It’s mainly used to determine what events will trigger a buyout in the event of death or disability or what price will be paid for a partner’s or shareholder’s interest in the partnership.
  • Capital Protection Insurance. Imagine your co-founder is the guarantor of a substantial business loan you have outstanding. If he were to die suddenly or become seriously incapacitated, what would you do? How could you shield your company from financial ruin? The answer is capital protection insurance. With it, you could call on the loan to be repaid or put a stop on any further funds being loaned, safeguarding your company from going out of business.


What Are The Advantages of Keyman Insurance?

In addition to protecting your company in the event of death or critical illness and strengthening trust and loyalty among employees in your company, keyman insurance offers a number of overlooked advantages.

These include:

  • Security at an affordable price. While you can’t prevent events such as the death of a key person in your business, you can mitigate the consequences of such events. And for a modest monthly fee, you can secure the peace of mind that if something bad does happen, you can maintain a certain standard of living and your finances won’t be burdened.
  • Freedom of choice. Keyman insurance offers the freedom of being in control. With the insurance policy in place, you have the freedom to decide which employees to insure. As mentioned above, anyone who is an asset to your company can be protected


What Does Keyman Insurance Cover?

There are four categories of loss for which keyman insurance can provide compensation:

  • Loss of revenue. If a key person passes away or becomes ill for an extended period, keyman insurance provides temporary personnel and, if necessary, finances the recruitment and training of a replacement.
  • Insurance to protect profits. Keyman insurance can be used to offset lost income from lost sales, losses resulting from the delay or cancellation of any business project that the key person was involved in, loss of opportunity to expand, loss of specialized skills or knowledge, and more.
  • Insurance to protect shareholders or partnership interests. This enables shareholdings or partnership interests to be purchased by existing shareholders or partners. (Note: if you’re a venture-backed startup, most venture capitalist will insist you have keyman insurance before they invest in your company.)
  • Insurance for anyone involved in guaranteeing business loans or banking facilities. As mentioned above, this covers the guarantor of any outstanding debt in your company. (Note: the value of insurance coverage is arranged to equal the value of the guarantee.)


Is Keyman Insurance Tax Deductible?

(Note: We recommend seeking taxation advice from your accountant  before considering keyman insurance as the below statements are a guide only.)

This is a common question we’re asked.

And for good reason:


Tax treatment for keyman insurance varies from country to country.

In Australia, for example, keyman insurance is tax deductible depending on how it’s used.

As per Section 51 of the Income Tax Assessment Act, the following practices are in place:

  • treat the premiums as non-deductible under section 51 and the proceeds as non-assessable of a life policy is involved
  • treat the premiums as deductible under section 51 and the proceeds as assessable income if an accident/sickness or term/whole of life policy is involved.

When it comes to paying tax on the benefits received by the beneficiary, the following ruling usually applies:

  • the claim payment is not taxable if received by the original beneficial owner if a life insurance policy is involved
  • the claim payment may be subject to capital gains tax (CGT) if the benefits are received by a company or trust for an accident/sickness/life policy
  • the claim payment is usually not taxable if received by the life insured, spouse or relative for any policy involved

As with any insurance policy, it’s important to understand that keyman insurance has both tax-deductible and non tax-deductible components.

Most businesses either purchase keyman insurance for revenue, capital, or both.

Key person insurance is considered to be bought for revenue purposes if it’s to find a suitable replacement or replace lost income that comes as a result of losing a keyman.

As Finder writes,

Any purpose that ensures continued revenue and profits for the business and any expense that has to be incurred for the successful running of day-to-day business activities that directly result in income are considered as revenue purposes.

On the other hand, if key person insurance is purchased to back a loan you’ve taken out, or to ensure your company debts are repaid, then the Australian Taxation Office might consider the fact that you took out keyman insurance for capital purposes.

Put another way:

If the funds from the key person insurance are NOT used for income generating activities but are instead used to further the company after the loss of its key person, then it’s for capital purposes and the premiums paid for the insurance will NOT be tax deductible.

To clear up the confusion that often comes with identifying whether keyman insurance is deductible or not, we’ve broken it down into two categories below:


When keyman insurance is tax deductible

  • When it is used to compensate for the loss of profits and revenues of your company or business
  • When it used to hire and train the replacement of your key person
  • When it is used to pay the temporary replacement you have employed until a full-time replacement is found
  • When it is used to pay debts incurred by the loss of your key person


When keyman insurance is NOT tax deductible

  • When the benefit is used to pay the debts of a key person
  • When the benefit is used to pay other debts incurred by the loss of the key person
  • When the value of goodwill is replaced because of the absence of your key person
  • When lines of credit are replaced guaranteed by your key person


How Much Does Keyman Insurance Cost?

While the cost of keyman insurance varies from one insurance provider to the next, the amount of cover will often be calculated based on the amount of profit a key person brings into the company and the loss that would occur without them.

As with all insurance policies, it’s worth shopping around to get a fair quote. Ask for quotes on $100,000, $250,000, $500,000, $750,000 and $1 million and compare the costs of each. Then, consider how much money your business would need to operate, in the event of a tragedy.

A common question we’re asked is, “How much keyman insurance do I need?”

Here are a few things to consider:

(Note: The figures below are general advice only and have not taken your personal circumstances into consideration. Please seek advice from your accountant or one of our financial planners before deciding the right amount for you)

  • The size of your business and the cost to replace an employee. You need to consider the size and financial situation of your business operations, but in most cases, you want to insure your key person for as much as you can afford. In Australia, for instance, you can take out cover for between $500,000 and $10 million. They may seem like exorbitant amounts, but think about how much your business would realistically need to survive until a key person could be replaced, and how much would need to be spent on recruitment and training.
  • The structure of your business. The structure of your business will obviously influence the amount of cover required as you may need to buy back shares in the company from family members of the deceased to ensure you remain in control of your business.
  • Review your cover frequently. Make sure the level of coverage is regularly reassessed to ensure the benefit will be enough to cover the costs during the loss of a key person (especially if you plan to use the benefit to buy back shares from an estate).


What Do I Need to Know Before Applying for Keyman Insurance?

Before you apply for keyman insurance, make sure you:

  • Know the value of your key person. While it’s difficult to put a value on your own head or that of someone important to the company, you need to estimate their value to determine the level of cover you want to apply for. Consider the value of business that could be jeopardized or lost without that person, the percentage of sales generated by that person and the costs associated with replacing them.
  • Know whether you need key person insurance. Not every business is eligible for keyman insurance. If, for example, your business already has credit insurance which covers outstanding loans and debt amounts, you might not need keyman insurance. Consult with a financial planner before moving forward with your application.
  • Know how your business will recover from a loss. Often, keyman insurance applications require business continuation plans as part of their application process. With that in mind, it’s important you create a plan that outlines how your business would continue to operate after the loss of a keyman.



Keyman insurance is not for everyone.

But you shouldn’t dismiss it without doing some research, first.

While it isn’t always convenient, investing in keyman insurance is one of the best ways of protecting your business—and those involved.

To learn how keyman insurance can protect you and your business, contact us for a free quote today.

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