She's On The Money - Insurance Q&A

Episode Date: July 26, 2022

On this episode we go deep into questions from the community all about insurance. From understanding what insurance is covered inside your Super, to personal and income insurance, or how to know if you're paying for things you don't need, plus so much more!Acknowledgement of Country By Natarsha Bamblett aka Queen Acknowledgements.The advice shared on She’s on The Money is general in nature and does not consider your individual circumstances. She’s on The Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. Victoria Devine and She's On The Money are Authorised Representatives of Infocus Securities Australia Proprietary Limited ABN 47 097 797 049 AFSL - AFSL 236523.See omnystudio.com/listener for privacy information.

Hello, my name is Natasha Nabanunga-Bamblett. I'm a proud Yorta Yorta, Kernai, Wolperi and Awadjeri woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on Awadjeri country, acknowledging the elders, the ancestors and the next generation coming through. As this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow. Let's get into it. She's on the money. She's on the money.

hello and welcome to she's on the money the podcast for millennials who want financial freedom. Oh, thanks, G. You're so welcome. Questions about insurance, what you need, what's a waste of money, and which you should prioritize are among the most common questions we receive in the She's on the Money inbox. And even though there's plenty of info out there on the internet, we found that it can all just be a little bit too much to wade through on your own. That's why today we're dedicating an entire episode to insurance, helping you to answer your burning questions about pretty much every type of insurance under the sun. My name is Georgia King and joining me as she does each and every week is financial advisor, Miss Victoria

Devine. V, how are we? Hi, well, how are you? Yeah, good girl. Good to see you. Am I right in thinking, V? I don't know why I'm pretending here. I'm doing a bit of acting, but all of the questions from today are pulled from the community. Is that correct? Yeah. So we did a little Q&A on the Instagram story and said, what do you want to know about insurance? We're going to do a Q&A. So this could be wild because I didn't pick these questions. You did. And I mean, arguably, I should have picked them, but you wanted to have a turn. So that's good. Exactly right. So the first question for today, it comes from multiple people, Sarah, Jess, Lily, Anita, Carl, Mads, Annie, Jessica, and Sophia. They all had the same question.

They all had the same question. And that is, what's the deal with insurance inside your super? All right. This is a very good question and arguably a very popular question. Was that really the only amount of people that asked this? I feel like this would have been a really popular one because so many people in our community always say things like, oh my gosh, no, I don't need income protection or I don't need life insurance because it's inside superannuation. But essentially, insurance inside superannuation is there to help obviously provide for you and your loved ones if something happens to you or you can't work anymore because of illness or injury. And it's usually offered through a default superannuation company or your employer-sponsored super plan as cover

they've negotiated for you and their other employees, which is called group insurance. And this is actually the number one way that Australians have access to affordable insurance. And the big part here is without the need for underwriting. So underwriting is the process that you go through when you apply for a policy outside of superannuation and sometimes inside of superannuation. We're an underwriter who is somebody who works at an insurance company and their job is to look at each and every single individual that comes into their insurance plan and says, all right, let me have a quick look at G. I want to see if she's going to be really risky if we insure her. Let's have a look at her history of illness and injury and see what she's like to

insure. And then we're going to offer cover based on that situation. If you're somebody who works in a really risky industry, you might go, oh my gosh, like I have really limited superannuation options. We know that people in the sex work industry, we know that people in aviation often really struggle to get income protection insurance because insurers look at them and go, um, no, absolutely not. You're too risky. You're very likely to claim. Therefore, we don't want to insure you. I have a client actually, who's probably listening to this because she listens to everything. So hi, my friend. But she is a traffic controller. So she isn't even in a plane. She just sits in the tower every day directing planes coming in and out of Melbourne International

Airport. And she's not able to get income protection because her job is deemed too risky for insurers to want to take it on. So one of the benefits of having these group policies is that you don't need to go through that underwriting process and you can access it very quickly. But when you have insurance inside superannuation, which sounds like a really sexy option because obviously inside superannuation, it's generally taxed at a lower rate than income tax. So you're saving some money. It's a bit of a money win. However, they're usually lackluster policies, I would say. So if you've got life insurance, instead of having the full amount of life insurance that maybe, Georgia, you need, you have the default amount. And a good example

of this is a client that I recently sent to my friend, Phil, who a lot of you guys in the She's on the money community? No, because Phil has partnered with She's on the money. I mean, he doesn't pay us. I just really like his business and what he does. And I no longer have the capacity to do all of this work. So I send a lot of it over to Phil Thompson at Sky Wealth, who does insurance only. So the thing I love about him is that, you know, and this isn't meant to be like a Phil Thompson thing, but he'll love these G. He'll listen to this and be like, wow, you're so nice to me. And I'll be like, never again, sir, never again. But the thing I like about him is it's really affordable to get advice from him instead of thousands of dollars. He's a

couple of hundred dollars to do the advice for just your insurances. And that's a much better position to be in if you're like me. I can't afford full service financial advice, but I want a policy that only a financial advisor can access. And I also want a financial advisor's advice on exactly what I need or my family needs or whatever that is. And I think for like $350 or $450, I can't remember. That's like his total advice fee. Obviously, then you have to pay for the actual insurance. But I think that's a bit of a money win. Anyway, I digress. But essentially, they usually lower policies. So an example of this is I sent someone from She's On The Money to Phil and they had $150,000 of life insurance. And they're like, that's a lot of money.

But when we looked at it, they had two mortgages, they had two young kids, they've got a husband. And when we did their life insurance, they needed two and a half million dollars worth of cover because that's the stage of life that they're in. And unfortunately, the superannuation product had a cap and they were like, oh, you can only go up to $500,000 and you can only claim for certain things. Whereas a policy that made more sense to them that was set up by a financial advisor makes more sense. So inside super, I love that there's a default. And that means that so many of you just have cover already without even having to think about it. However, it might not be the right fit for you and you might need to change it. So inside superannuation, you can hold

income protection, you can hold life insurance, and you can usually hold some level of TPD, which is total and permanent disability. Gee, please remind me, but what date did we do our personal insurances episode? Oh, let me cast my mind back. I think it was the 18th of February 2020. Yeah, okay, smarty pants. But go listen to that episode because it really breaks down each and every single type of personal insurance, and I think it's really important. But essentially, insurance inside super is generally not nearly enough cover it's usually a group policy which means it is not taking your personal circumstances into consideration and you're not being put in the best possible position however it being inside super isn't the issue it's the default cover

because you might go down the road g talk to phil be like hey phil need insurance and he goes great you need a life insurance policy that's different and you'll be like thanks no problems he'll say do you want me to just put in your super? You'd be like, great, money win, no problems. And you can sort that out. However, your default cover that you might have with your industry super fund might not be enough and it might not be comprehensive enough for you to go, all right, well, I'm comfortable with this. The same is true for income protection. I spoke about this on that personal insurance episode, but often income protection policies that are held inside super that are default have a time cap. So that means that if you go, oh V, I'm fine, I checked, I do

have income protection, you might actually only have an income protection policy that will pay you for two years. It won't pay you until the age of 65 like a policy I have. And the reason that's so important is, George, if I get injured at work and can never return to work again, two years of cover is going to do nothing. I need to be covered until retirement age so I can still meet my financial goals and my life goals and still have a life. Whereas if I had relied solely on that two-year policy that was inside my super fund, after two years, I'd be scrambling to work out what I was going to do if I was unable to return to work. So I think it's really important to understand the semantics around that. The only insurance you cannot hold inside superannuation

is called trauma insurance. And to me, that's quite an important one. But again, it's kind of like the icing on the top. I would really prioritize getting income protection because it baffles me here in Australia that, gee, you'll insure your iPhone, you'll insure your car, you'll, you know, we did a travel episode recently, you'll go and insure the camera that you bought that's, you know, a couple of grand and I totally get that. But you don't look at yourself as an asset. Like you and your body are able to go to work every day, G, and make money. That is your biggest resource. That is your biggest asset. Why aren't we protecting that? And that's what income protection does. So I won't go on and on, but essentially insurance inside superannuation

can be a little bit lackluster and not put you in the best possible position. Holding an inside super is not a bad idea. It can be a bit of a money win when it comes to tax and what you pay, but it's all about being proactive and having a look at it and going, is this serving my needs and what I actually need to get out of an insurance policy? And if you haven't reviewed it, I guess now is the time to do that, my friends. All right, next one under this super umbrella V, it comes from Ariana. I ditched insurance from my super in my early twenties. Now I'm 35 and I'm wondering where to start. This is a really common one for our community. I would start by having a look at your super fund. I've said it before, call your super fund, have a chat to them

about what they offer so you know what that looks like. But in all honesty, if you're 35 and do not have any insurance, I'd go talk to a financial advisor. Absolutely. Straight out of the gate, go and organize your insurances. It will be one of the most important things you do for your financial future. All right. Let's move on now, V, to income insurances, which I know you just Income protection, extremely important. I will talk about this all day if you guys will listen. Sit down, grab a drink. This is not Friday drinks, but this is what I talk about with my friends at Friday drinks in real life, G. Exactly right. No, really. It's a bit sad. Okay. The first question here comes from Beck.

As a sole trader, what options do you have for income protection? You have a lot of options. The important thing here is proving your financials in the same way that you would have to apply for a mortgage. So sole traders obviously get the raw end of the deal when it comes to getting approved for anything, let's be honest. However, it's about having clean bookkeeping and clean financials and going to an insurance provider and saying, hey, cool, I want to apply for income protection. I'm a consultant. I am an engineer. I do whatever I do. And then going, this is my income and this is how I've proven it. So usually you can't go straight out on your own and go, oh my gosh, I'm out on my own and I've organized my insurance.

it's very unlikely that they'll accept that because honestly, they'll just see you as unemployed at that point. However, if you've got a couple of years of tax returns and you've proven your ability to generate income, they're very likely to consider it. Obviously, you need to make sure that you're not a sole trader in an industry that doesn't have a good time when it comes to income protection. However, I would again be talking specifically to a financial advisor and working out what actual insurances you need as a small business owner because if you're a sole trader, you're a small business owner basically, and working out what other insurances you need because you might need like public indemnity insurance or any other types of

insurance that are necessary for your industry. So it really would be important to talk to a financial advisor or an insurance broker. Nice. All right, let's move on to Katie now. Hi, Katie. I'm nervous about income protection due to pre-existing conditions. Do you have any tips? So I'm assuming that means health conditions, right? Yes. So a pre-existing condition is something that will either limit your ability to get income protection to its full capacity or it will stop you from getting it completely. So in our industry, G, this is cooked and a few people that are very close to us have recently gone through this and it makes my blood boil. During COVID, we had a pretty, pretty hard time, right? Rough time. Rough time. Really

isolated. People were going online and getting telehealth appointments and organizing psychologists to talk through that because arguably we went through a traumatic event together, right? It was not easy. However, recently I've had a few people put in insurance applications for income protection and it has come back from the insurer and they've said, look, because they saw a psychologist and had quote mental health issues, we're not able to give them cover for mental health. So they give you what's called an exclusion, which is where they exclude a part of you from being insured. So they will say, look, gee, I'm not going to insure your mental health, but I will insure everything else. So if you stop work because you broke your leg and you no longer

can come into the studio, we'll cover that. However, if you have to take time off and you're not able to work due to your mental health, we won't be covering that. And you go, well, that's a bit unfair. Exclusions do suck. They are very common. The insurance industry is getting so strict. Honestly, they are so behind from my perspective in understanding mental health and understanding medication and what people go through. I mean, they're trying. It is a very dated industry in a way, but a lot of people are trying a lot of things. However, I think it's really important to understand that the earlier you get insurance, the less likely you are to have an exclusion on your policy. So the older you get, the more likely you are to break things or have a

bad back or, you know, twist your ankle at netball like I've done before. And I'm in the very grateful position where I got my income protection when I was quite young. So it was when I was first in the industry, like baby 22 year old Victoria was like rearing to go. She got her income protection and had absolutely no exclusions. However, I'm telling you right now, if I went to apply for income protection, they would exclude my back because I sit at a desk all day and I go to a physio relatively often for massages and making sure that I stop getting these random headaches that I get. I also have a mental health care plan and I see a psychologist more regularly. I'm not saying I didn't need it at 22. I was just a lot poorer and couldn't afford my mental health

care plan, so I wasn't doing it. But now I'm in my 30s, I see a psychologist regularly. But because I see a psychologist regularly and the reason I see a psychologist is, you know, noted down as depression and anxiety, I know for sure that I wouldn't have got income protection on that, which is really disappointing, but so important to talk about because it's a really disappointing thing to happen when you've been working with a financial advisor and they come back and be like, hey, gee, so we reviewed your circumstances and your application and they spoke to your doctor and they're not willing to cover your ankle or your knee or your back or this certain part of your back or your mental health. And I just think it's a bit sucky, but essentially if you're worried

about income protection for pre-existing conditions, the best thing you can do is actually talk to a financial advisor about it. See what insurers are the best options for you because different insurers have different policies. So I know that if I'm talking to a client and they have a higher BMI, I know that there are a few insurers I'll go down the road to instead of others because I know the breadth of what they will and won't accept just from experience. And a financial advisor is going to guide you through that and then if you do have an exclusion one of the most important things I would ask my financial advisor is hey Georgia I see I've got an exclusion is it ever going to be reviewed is this blanket like is this something that's going to exist for

the entire policy or at what point in time are they willing to review it because often I ask that question like every single time I've gotten an exclusion and sometimes the underwriter will come back and be like, oh, well, actually we can review that in two years if she has a clean medical record. So then in two years, you'll come back and be like, haven't had any issues with my ankle, haven't had to do anything. Can you guys please remove it? And they very likely will. So I think it's about just knowing what you can and can't do. But the biggest thing I would say there is it is not a bad thing to have exclusions because you're still getting access to the rest of that income protection policy. So you're covered for cancer and you're covered for

everything else that might potentially go wrong. And I think sometimes people throw their hands in the air and go, well, if I'm not covered for mental health, like what's the point? Because mental health is not the only reason you might have to stop work. Yeah. There's a lot of other things that are included. This could be a silly question, but say, God forbid, tomorrow I get diagnosed with cancer. I can't then apply for income insurance. Yeah. That would be a pre-existing condition. And they would say, Georgia, like you already had this, we're not covering you. and so that's why just get it while you're healthy so many times we say oh my gosh I don't need it like I'm not going to waste my money on that because I'm healthy and young like things happen

to people every single day and unfortunately in my industry because of what I see and what my actual job is like I'm a part of that claims process like I have seen people in their late 20s be absolutely wiped out financially and their working capacity from things they never foresaw coming like I had a client and you know he's a really good client of mine one of the fittest guys you will ever meet late 20s was riding his bike through the Melbourne CBD got hit by a bus he's okay now but broke his pelvis both his legs a whole heap of ribs and was not able to work for a good eight months because he couldn't yeah income protection saved him because he had a mortgage and two young kids and that's the thing that enabled him to one take sick leave from work

but also be able to provide for his family. So for me, it is really important. It doesn't matter how healthy you are because bad things happen to good people. All right, last one here before we head to a little break. It comes from Nicole. How do I choose a provider for income protection insurance? It's overwhelming. I feel like this is, I sound like a broken record. Go see a financial advisor. Have a chat to Phil Thompson from Sky Wealth. I am obviously a big fan of him, but that's because I trust his advice and I trust that the She's On The Money community know that. I'm not making money from feel like there's no referral arrangement or anything like that. I just think it's so important to put you guys in the best possible position. And how good is it,

G? She's On The Money has meant that my business can't take on any more clients at this point. So why wouldn't I promote the best financial advisors that I know? So it makes sense, but I would talk to a financial advisor. But I also believe this is so lame, but I believe that an income protection policy kind of chooses you because it's like a funnel, right? We set out to understand what we need. We go, all right, well, what do we actually need? We might need a certain amount of cover. That might push a lot of policies off the table because there are, you know, a limited number that offer the amount that you need. It might be pre-existing conditions. So you need to work with an insurer that actually will accept that or give you terms that make sense to you and

your personal circumstances. In our insurance industry, BMI is a really big thing. I hate talking about this because I think it's ridiculous. BMI, I don't believe is a good indicator of health. However, the insurance industry does. And if you've got a higher BMI or even a lower BMI, there are particular insurance companies that I would use over and above that. But you need to take your personal circumstances into consideration before you actually look at a company. You can't just head to a company's website and be like, oh, these guys look good. I'll look at their PDS and make sure they're fine. Because some policies have really good gynecological care. Others don't have that at all. There are other insurance policies, G, that only cover one type of breast cancer and

not the other. So if you have the BRCA gene, which is the gene that is hereditary in your system, that means if you carry that, they might say, absolutely not, we're not going to insure you at all for breast cancer. However, there are other policies that might consider that. So I think it's not necessarily about which insurance policy should I pick, but more what are my personal circumstances that genuinely need to be taken into consideration here? Because for me, I'm in my thirties. I've spoken about this honestly and openly. At some point, I would love to have kids. I want my reproductive system to be insured. I want to make sure that I'm okay in those circumstances. No, it doesn't pay for IVF and stuff like that because I know that question's

coming. However, what if something goes dramatically wrong during childbirth? Am I covered for that or am I not? Because there are some policies that don't cover for that because technically if you're giving birth, you're on maternity leave and if you're not at work, you're not covered. Oh, what the devil. So from my perspective, the best possible thing you can do when sorting out your insurances is actually get some advice and put yourself in the best possible position. Perfect. Great advice. Before the break, on the other side, we'll be chatting health insurance. We'll be chatting about general insurance questions. We'll be talking about life insurance. We're going to do it all sexy. Stick around. Straight back into it, Victoria Devine.

We're going to start with some general insurance questions, which I'm quite excited about. The first one comes from Hannah. In your opinion, Bea, do you think people are overinsured? No such thing as being overinsured or overeducated. Is that the quote from Oscar Wilde or did I just make that up? I mean, I've not heard it. Actually, Georgia King, I think we're wildly underinsured and I don't think we are. I know we are because Australia is the most underinsured country in the entire world or the first world country in the entire world. And that is not a good thing, but I mean, it's a trusting thing, right? We discussed this in our travel insurance podcast, which was a really good one where I

explained that all of us as Australians are just so trusting that we just don't see it as a priority. We're like, oh, nothing's going to happen. It's fine. Or I'll just move back in with mum and dad if something happens? Or, oh, I'll just go into Centrelink. And I mean, do you know what? There are some circumstances where you might do the pros and cons and with your income, it might actually be less than what Centrelink is. So if you can't work, a disability pension might actually be your best port of call, but that's a circumstance you actually need to do the maths on and work out whether that works for you or not. But no, I don't think people are overinsured. I think they're underinsured. However, I think that we prioritize the wrong types of insurance. Like we're so likely

to take out additional iPhone insurance. So like I went and bought new headphones the other day and I really wanted some AirPods because I've been using like fake AirPods until now, which are terrible. The quality is insane. Like, oh my gosh, it's insane that $12 eBay headphones are not nearly as good as the $250 AirPods that I purchased. But I splurged, right? And at checkout, they're like, would you like to extend AppleCare insurance for another two years for like this amount of money? And I was like, no, I would prefer to spend, I think it was like $69 or something. Whereas I'd prefer to spend that on a trauma policy or on something that protects me. I don't need to protect my headphones. And I totally get if other people see the value in that and like you do you.

However, I just think that we prioritize the wrong things. Like it doesn't make sense to me that someone would go and insure their AirPods and not insure their person. Well, that's where it gets confusing though, isn't it? Because there are gimmicky insurances out there that make it really confusing because you're like, well, if you can insure anything nowadays. You can, you can. And you can kind of conflate that and think that it's equal to income insurance when it's completely different and you don't need it. Which leads me, V, to our next question, which comes from Jess. How do you know if you're being overcharged or paying for things you don't need? Just in general? When it comes to insurance. When it comes to insurance.

so that's where you want to understand exactly what you're getting. To be blunt insurance can be really expensive and it's a bit like health insurance right the more you pay the more you get or the more access you have to different things and opportunities. I think it's just about being educated and understanding exactly what your policy is and what it's made up of and understanding what the market's doing and talking to your advisor and saying should I do this or shouldn't I do this. However you know if you're in a position G where you've had a hysterectomy for some reason. I wouldn't want to be paying for reproductive health if I'd gone through that. I think it's just important to have a look at something and understand what benefits you and

what doesn't. Because historically, G, I have seen people come into our office, sit down and I'm like, oh my gosh, what have you got? And they've got like these epic policies. This was a fair few years ago and it wasn't my client. It was a financial advisor in my office's client and he reviewed this client's insurances and he had maternity cover and like full like childbirth cover and all of this other stuff and we were like but he's male like this makes no sense and like obviously I'm not being insensitive here we knew for sure that this client was male it wasn't a question of like oh my gosh is there something that you know we're not privy to because we're very sensitive to those things however we're like no this bloke does not need this and called the

insurance company. They're like, oh yeah, it was default. Like we can remove it. You're right. It would reduce his premiums. And we're like, yeah, do that. But also please refund us for the entire time he has had that because he shouldn't have been paying for that. And you guys know that. So it was kind of funny at the time, but also really cheeky. So I think it's just about understanding what you're getting, having a chat to your advisor and then like, what's the harm in giving your insurance company a call and saying, hey guys, just got my premium statement in the mail. Any chance you can do a better deal than that? Otherwise, I might look elsewhere and they might say yes or no or explain to you why your premium is such. But I think it's

important to always ask questions, but always be educated as well. But also on that G, be really careful about changing your insurance company. Because for example, I could today go and get rid of my income protection policy and go get a cheaper one. It's a no brainer when it comes to the semantics of like what's cheaper, right? However, I have an insurance policy that has no exclusions, has a whole heap of benefits for me personally. You know, it was written a long time ago, so I'm actually completely covered. If I went and got a new insurance policy today, there would be exclusions. There would be a whole heap of things that, to be honest, is not worth changing. Like I'm not going to go get a cheaper policy because with insurance,

it's actually about the quality of the insurance, not necessarily getting the cheapest cover. because that's not going to put you in the best possible position. So would I go out and get the cheaper policy? No. Would I try and negotiate a better rate on my existing policy? Absolutely. So I'm in that tricky position where I don't want to change mine because I do have a financial advisor written policy that is in my best interests. However, that's where you want to have those conversations around, is this what's best for me? Because we all know that mate that's like, oh, I don't need insurance. I just cancelled it. Like, I don't need it in my super. And you're like, oh my gosh, like that was such a valuable thing to have. And even if you don't want insurance

inside super, like another recommendation, if you want to save some money and you're just not sure about the super, lower the amount instead of being covered for half a million dollars, like call up and say, what's the lowest amount I can be insured to keep that policy so that I save some money, but also I'm not putting future me in a worse off position. So I think it's just important to know that you can dial things down and then later you can dial them back up. But if you cancel them completely, you could find yourself in a sticky situation. Brilliant, V. I feel like I have so many more questions to pepper your way. So I'm making an executive decision here. We're going to press pause. I love that. So we can all take in what we've learned today. And then we're going

to do a part two to this episode. Oh, I love that. So we can really stretch that. Yeah. Great idea, my friend. Because it's dense. So let's do this. Look, it is. And I feel like people could be like, this is really dry, V. But like, it's important for you to know, right? 100%. All right. Why don't you wrap the boring but important stuff and you guys can get on with your day. It would be a pleasure. Alrighty, guys, please remember that the advice shared on She's On The Money is general in nature

and does not consider your individual circumstances. She's On The Money exists purely for educational purposes and should not be relied upon to make an investment or a financial decision. And we promise Victoria Devine and She's On The Money are authorised representatives of In Focus Securities Australia, Repairtry Limited, ABN, 4709-779-7049, AFSL 236523. See you on Friday, guys.

Bye, guys.