She's On The Money - Personal Insurances 101

Episode Date: January 30, 2024

Does the idea of personal insurance confuse you? Well we've you covered as Victoria is joined today by insurance expert Phil Thompson from Skye Wealth! In this fascinating conversation they talk income protection, life insurance, TPD and trauma insurance. Plus, the give you the ins and outs of what kinds of things are covered by the insurance through your Super fund as well as next steps to take if you're not covered! 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. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs.  Victoria Devine and She's On The Money are authorised representatives of Money Sherpa PTY LTD ABN - 321649 27708,  AFSL - 451289.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 millennials who want financial freedom Welcome back to another one of our Wednesday Deep Dive episodes, where I'm usually joined by Miss Bec Syed, but there's a different guy in front of me today, Mr. Phil Thompson. What gives you the audacity to think that you should be on She's On The Money? I'm Bec 2.0. Oh, good. You've got longer hair than Bec.

Yeah, that's it. If you don't know the voice, I'm not surprised. It's because we always talk about Phil on the podcast, yet haven't had him on before. Phil is the CEO and director, also a financial advisor at Sky Wealth, which if you've heard of before, again, I'm not surprised because all I do is talk about the importance of life insurance, TPD, income protection, and making sure that you are protecting your income because to me that is the biggest asset that you will ever have in your life. And Phil, I thought, it's the end of January, it's now time to give my community an absolute

kick up the pants to get their personal insurances sorted because arguably it's more important now than ever, especially during a cost of living crisis where everybody is so stressed about finances. And also we all seem to think that we're a little bit untouchable. Yeah. So Phil, TLDR, I want to know, what do you do? Why do you do it? Yeah. So we're a financial advice firm. We just specialize in personal insurance. So that's all we do. So anyone who needs investment advice, superannuation advice. That's not what we do. You're not the guy. Yeah. We're not the people for that. So we just do personal insurance. We just help people decide how much cover they need. And we work collaboratively with our clients about the level of cover. You don't just decide

how much you need. You also talk about like how important it is and understanding the claiming process and all of the other stuff. I feel like that simplifies it too much. Correct. You don't just go, oh, you need X. Yeah. I mean, we talk about the need really. It's just about like, how much insurance do you need? What are the terms of that policy going to look like? So, we'll discuss potential exclusions, loadings, and then we'll talk about the cost. At the end of the day, insurance costs money. So, it's just about getting that balance between the level of cover that's appropriate and what's an affordable cost. Yeah. And I am really, really passionate about personal insurances. I think it's the one thing that you should really be prioritising.

Let's do a really quick basic recap. So, we've obviously done episodes on She's On The Money before about what personal insurances are. And I have discussed the four main types of personal insurances, Phil, that you would write. So we've got life cover, so death insurance, basically. Really easy to claim. Like, let's be honest, pretty simple criteria. Yeah. If you pass away, there are things like terminal illness. So if you've got less than 24 months to live, you may be able to get that life insurance paid out early. Then we have KPD, which is total and permanent disability insurance. Then trauma insurance, and then we've got income protection, which is arguably my favorite type of insurance.

Did you know people have favorite types of insurance? Or is it just like the people in this room right now who might have favorite types of insurance? Maybe the insurance geeks, yeah. Let's break them down a little bit before we dive into it, because I don't want to assume that everyone is just looking at this going like, oh, great, Phil can help me with my car insurance. That's not what you do. So let's start with arguably my favorite type of insurance, Income protection. Why do we need it? What is it? How do we get it? And why should we not just rely on the fact that we have two years cover in our super sometimes? Yeah. Income protection is the most important because your incomes are most important. When

everyone thinks about their financial goals and objectives that they want to achieve, they need their income to be able to achieve it. And so we need to be able to protect that income if something bad happens. So a lot of super cover will cover up to two years. And so what that means is if you're injured, ill, sick, can't work for most reasons, then you'll get paid a monthly payment from the insurance provider after that initial waiting period. So, you've got to wait a certain amount of time. So, it's kind of like car insurance excess. You've got to pay a certain amount with car insurance excess. So, that's the waiting period. After that waiting period, you get your monthly payment until you're back at work. So, if you're only out of work for six

months, then the payment stop once you're back at work. If you can't ever work again, then you'll get paid or up until the benefit period. So most super funds will have a benefit period of only two years, but you can get income protection with a benefit period till age 65. I feel like I've had a lot of conversations, especially in my community over the last few years where people go, oh, well, I only need two years. It'll sort out then. Is that the reality of the circumstance, Phil? Yeah, it's really interesting. So most claims are less than two years. So the majority of claims that are paid out finish within two years. However, majority of the money insurance companies pay is for the income protections claims that go over two years. So, what that means is statistically

you're less likely to need it after two-year period, but the majority of the payments that are paid out is for that long-term claim. So, it's a matter of going, do I want to protect the biggest downside risk, which is I can never work again. So, that's what that age 65 benefit period policy covers, that biggest downside risk. If I just want to cover the majority of times I'm going to need it, well, yeah, a two-year benefit period is okay, but you're going to lose millions and millions of dollars worth of benefits if you don't have that longer-term benefit period policy. And there are a lot of reasons why it's so important to consider the amount of times people are like, oh, but that's okay. Like, you know, if something happens, I'll move back in

with my parents for a little while, or, you know, don't worry, like I can always apply for Centrelink. And if you're in a circumstance where your income is essentially equivalent to Centrelink, I totally understand why you might do that. But Phil, you're a dad, you've got three beautiful girls. Would it be appropriate to not have income protection in your circumstance? No, not at all. I mean, my wife's currently not earning an income and she's trying to write a book and it's amazing. But if I wasn't able to earn an income, we'd be stuffed. So that's why, you know, it's kind of like home insurance. If I've got a home that's worth half a million dollars or a million dollars, do I want to cover $50,000? Because most of the claims would only

cover $50,000. Or do I want to cover the million dollar house that if it burned down or I could fully replace it? So that's why I'm a big believer in a long benefit period and making sure that you cover the right level of cover for your income. Yeah, I was a little bit cheeky. Obviously, I had the privilege of being a financial advisor when I was younger. And so I actually set up my income protection when I was fit and healthy and hadn't had any babies and didn't have a lot of health complications? Should we be setting up our income protection once, you know, life gets serious? Like we're a dad of three, or should we be doing what Victoria did and set it up when they're young and go, hmm, the policy's a lot cheaper now? It's like, when do we try and talk

about income protection? Yeah. I mean, it's an interesting conversation. I like to set up early. The earlier you are, the less health complications you have, generally speaking. So the earlier, the better. But also just from a financial point of view, as a 25-year-old, if you've got a full time income and think about that income, if you couldn't work until age 65, retirement age, or by the time a 25-year-old gets to retirement, it'd be 75. So the long-term cost of that loss of income is actually greater for a 25-year-old than it is for a 55-year-old. Even though you may have less financial kind of obligations. You may not have a family yet. You may not have a house. That loss of income is actually much greater. So when we're talking specifically

income protection, the earlier, the better. When we're talking about things like life insurance, which I'm sure we'll get to, maybe that's not necessary for someone who doesn't have dependents, doesn't have a mortgage. So for income protection, the earlier, the better. Yeah, I agree. And I think that's why it's one of my favorite types of insurance, which honestly, the more I say it, the more I'm like, you're a bit of a loser, Victoria. but it's my favorite type because I think it's applicable across the board and it's not necessarily one that you can switch on and off if you have an income it is a no-brainer to me to protect that because how many times do you see people buying new cars and they're so happy to pay

for the extra insurance and they're like oh no I wouldn't just get third party I'd get comprehensive because that's so important I go but what about you what if you can't work like if I crash my car tomorrow, Phil, and it doesn't have any insurance on it. Let's pretend I did pay for third party because we don't want to implicate anybody else. But I'm out of car and I'm going to go to work and I'm going to earn an income and I'm going to save up and buy another car. And it's not the biggest deal in the entire world. Yes, it's a lot of money. And yes, it's going to feel like trash, not having it, lots of regret. But you know what's worse? If you have a fully functioning car and then somehow you've injured yourself, you can't drive your car, you can't go to work, you can't

earn an income and all of a sudden the car repayments are unobtainable. You're not able to keep that. You have to move back in with mum and dad. You have to change your lifestyle significantly. And while yes, most claims are under two years, if they aren't, you've actually shot yourself in the foot for your entire life. So your goals, your values, what you wanted to achieve in your life, it's just not going to happen in the same way. Whereas I look at income protection and go, well, it's not just income protection. It's kind of like life and goal and value protection because if something happened to me and I can't work ever again, well, at least I get to kind of have the lifestyle within the breadth of my illness that I, you know, really

want to have. And I'm not constricted by the fact that now I basically have to be on Centrelink and I just go from hypothetically earning $80,000 or $90,000 a year down to $40,000 a year and scrimping by and it's a situation I didn't technically have to put myself in. So I'm wildly passionate about it, mainly because I'm very black and white. I'm like, it just makes sense, guys. The other thing I was going to say is a lot of people will come and say, well, I've got some work cover. Work cover will pay me. The great thing about income protection, you can be traveling overseas and injure yourself and still be eligible for a claim of free income protection. You can be at home looking after the kids and pull your back because

you're playing with the kids like I do every second week, it feels like. I don't have kids yet and I still feel like that. And you can claim on your income protection. So with the income protection, not like work cover. Work cover, you need to prove that it was a workplace injury before you'll get paid any work cover. Income protection, it really doesn't matter how it happened or what happened. It's just a matter of can you work or not. If you can't work and you meet the definitions of the policy, then you'll get paid out income protection. So I feel like insurance is something that a lot of us just go, this happens to other people, not to me. This is something that just isn't going to happen. I'm fit. I'm healthy. I've shared on the podcast

before that I had to do an income protection claim a while ago for, I would say friend. They're now a friend because I've exited the industry, but just like somehow managed to keep him as a pal. But he was the fittest, healthiest guy I had ever met. Like, you know, the guy that like gets up at like 5 a.m so they can cycle for two and a half hours before work and you just be like yeah the lycra yeah like he was crazy like his diet was immaculate like every time we went to the beach i'd be like nobody else is going to be happy wearing swimsuit around you mate like you are putting us all to shame he got hit by a bus and he's fine now so it's okay but he was riding the same path that he rode every other morning because as i said happy lycra guy

he got hit by a literal bus and broke his pelvis in like four different places couldn't go to work you know had a whole heap of other broken bones as well but in addition to that had a whole heap of spinal injuries that needed long-term support for and he's still on income protection because he cannot go back to work he was a chippy what are you going to do at work if you've broken all of your bones and you know you can't stand prolonged periods of time his income could have been completely wiped. And I mean, he was a chippy, he was self-employed, he had a pretty good income, able to prove all of that. And now he's still able to support his family and do exactly what he needs to do. But to me, that was always a really good example of, I remember rolling

on into work that day, I had a coffee in my hand and I sat down at my desk and like, I had a missed call on my phone. And to be honest, hadn't really thought about it. Got an email and went, oh, I need to call. Like it was one of those things that even shook me as a financial advisor because I think sometimes when you're doing things like income protection insurance, it's for illnesses that are prolonged and often you go, oh, they've been saying they're not being well or they've been going through testing or it doesn't come as a shock. But to me, I was like, life is really fragile and really dangerous. Have you had a lot of claims like that? Yeah. I mean, most of our claims, people wouldn't have thought it'd happen. We've got, you know, a lady who was 34, had breast

cancer four months after her trauma and income protection was put in place. And she was umming and ahhing. And I looked back, we'd spent like six months working with her, kind of, you know, trying to work out if the premiums were okay. And she was umming and ahhing, finally went ahead and said, oh, I probably don't need this. Four months later, was on income protection and got a trauma payment. One of my really, really close friends, the first day of the work year last year, gave me a call and he works in the industry. And I said, mate, I know you're not meant to be working today. Get off your phone, get off your emails. And he's like, well, it's actually a personal call. I've just found out I've got pancreatic cancer. And so my first

work day of last year, I went to the hospital and he's been on income protection for 12 months, got a trauma payment as well. And the first day of this year, unfortunately, we submitted a terminal illness claim for his life policy. So he got paid his trauma payment. He got 12 months worth of income protection. And now he's getting his life insurance paid out early while he's still around. And for him, it's incredibly important. He's got two young boys, just a year younger than two of my oldest girls. And for him, it's so important for the money to hit his bank account before he passes away. He knows he's going to be passed away. Then he knows his family is safe and protected. Yeah, he knows they're going to be comfortable financially and not struggle because

his wife isn't working. And so, I mean, it's obviously hard to talk about, given he's a client, but also a really close friend. We've been working together for eight years. And this happens, right? Like, I feel like- And he's incredibly fit. Like, he is the same guy. Like, to me, I look back and go, well, that's why I don't go to the gym because- Because you're too fit. You may have pancreatic cancer. And so, yeah, it's really full on in the work we do, helping people with claims. But that's why, like, especially this year, it's so important.

The work I do is helping people get insurance. And of course, it's a cost. All insurance costs money. And it's about striking that balance between the level of cover and the cost, but some covers better than nothing. Because my good friend, you know, we had a conversation many, many times about getting insurance and he worked in the industry and now he's got it and it's getting paid out and it's making a massive difference for his family. That actually kills me. You have been a financial advisor for years and years and years, and I have known you since before you were doing just insurance only advice. And I remember how long ago was it that you decided to delve just straight into insurance. Yeah. 2020. Yeah. So I remember you called me

and you're like, I'm thinking this model, it's going to work. Like, and I just remember, I think it was like during COVID, I was having these conversations with you about what it looked like and how it was going to work. And I just remember going, you're insane. Like, you know, I at the time was a holistic financial advisor and I was like, I really, you know, like being able to provide the value to the client to be financial advice when it comes to investment and insurance and then their savings and goals. And now I look at it and go, Victoria, you are so silly. Phil's model is genius because you know the inside outs of the insurance world. You're not just looking at, you know, investment, which to be honest, if you're a financial advisor,

that often takes up a lot of time. And, you know, I'm not throwing other financial advisors under a bus because that was me as well. But often if you're a financial advisor that does investment, insurance and you know budget cash flow goal savings and superannuation insurance kind of becomes what I would call a hygiene factor you kind of tick a box and go well my client needs that we'll get it away but I'm excited about the investment side of things so as much as you focus on it and you kind of hear about it every day you're not in the trenches every single minute of every single day and now looking at your business model and my clients experiences because when I exited the industry, I did handball a lot of people over to you to be like,

please look after these clients really well, because I'm legally not allowed to anymore. And even our community coming back and being like, oh my gosh, I'm so glad I spoke to Phil's team. Talk to me about why you made that choice, but also why it's so important that you've made that choice, especially because not everybody knows this, but the industry has changed so much since then. Yeah. It's a good question, just from a business point of view. Why you do this? Financial advisors en masse are moving away from insurance advice. And so a part of me thought, well, it's a great space to be in if everyone's getting out, but the need is still there or growing. You've either got rocks in your head or you're really smart. Turns out he was really

smart, guys. Not too sure. We're still undecided about that. So I moved into it because the need for insurance is still there and is growing. We're getting wealthier. So the need to protect that wealth is getting more. So I've still got a lot of respect for holistic advice, firms and advisors, and we refer a lot of business to a holistic advice firm. You would have to because you don't do it. Exactly. And so the reason I made that choice is because I feel like, unfortunately, financial advice is very expensive for holistic advice.

So focusing on one area of the advice need, we can help our clients make a really informed decision about a really important financial product, which is insurance, at a much lower cost than a holistic plan can cost. There was a point where we had to charge $5,000 for an upfront plan for holistic advice. That's what I used to do. So I remember I would talk to people and be like, oh yeah. And like my standard fee for completely holistic advice was about six and a half thousand dollars. Right. And you put that number on the table and it terrifies people, especially

my community who were often starting with, look, I've saved my first five grand. I'm really excited to get into investing and creating wealth for myself. And I'd often have to say, please don't come and see me then. Like, and I think that's one of the reasons I exited the industry. Cause I'm not able to have the impact that I want to have. But when you break it down with how much time is spent on crafting a plan and doing research and the compliance these days, to me, is insane. I feel like I fill in the same form five different places to go to five different people to make sure that you are putting the client in the right position. And please don't get me wrong. It's essential. After the Royal Commission, all of these things make sense.

But then you're spending an hour in a meeting with a client for which, Phil, you would understand this too. Then you spend an hour writing notes of what happened in the meeting because you have to file note it. And when it comes out in the wash, there's not a lot of profit there because you're paying your admin staff, you're paying your power planners, you're paying for, you know, your overheads, even a financial services license just to call yourself a financial advisor is insane. Like, you know, I'm happy to talk about it, but my financial services license historically has cost a minimum of $50,000 a year. And then on top of that, my licensee was taking 5% of whatever I made. And that's normal. Like that's actually a pretty good deal. Like if you look at

it, you go, yeah, all right, well, that makes sense. Usually it caps out at the first million dollars you make. That is not the reality for most advisors, but you go, oh, okay, no worries. That makes sense because they do do a really good job when it comes to making sure that your client is protected. But all of that overhead means not a lot of profit. Exactly. And when you talk about a $5,000 plan for the average Australian where the business itself isn't making much money, it doesn't work that well. And, you know, I grew up in a very middle class Australia and I'm passionate about, you know, the everyday Australian getting advice. The difficulty with getting holistic advice is it's too expensive.

So what I decided to do is I will help people make an informed decision about one financial product, which is insurance. Now, we charge $330 for individuals and $495 for couples. So, it is much lower than a holistic plan. You mean it's not six and a half grand? No. I'll charge you six and a half grand if you want. Yeah, you probably already have. The reason we can make it much more affordable is because there is commissions on the insurance products. So, when we set up the insurance, we get paid a commission from the insurance provider. Now, it's all standardized in terms of the commission rate. It was actually before the

Royal Commission. There was changes with the commission rate. So, it's all standardized. So, whether we go with, you know, one issue or the other. Yeah, there's no actual financial incentive anymore because don't get me wrong, if people are like, there is, I'd be like, yeah, there used to be. Correct. There is now no financial incentive to pick, you know, one path over AIA. Like, it doesn't actually matter, which I know most of the good advisors never cared about to begin with because that wouldn't have been the ethical thing to do.

However, it does put the consumer in the best possible position to go, I know Phil can't take me for a ride because it's literally illegal. Yeah, correct. So that's kind of why we went to insurance only, because I'm very passionate about helping everyone. We want to make advice really simple. We want to make it affordable. That's kind of our mission at Sky. So that's why I went to insurance. It made up a really small portion of our business. I kind of dabbled. Since going there, it's so much more complicated than I ever thought. I thought it was simple. You just pick a level of cover, you pick an insurer and happy

days. And getting into it, specializing, you learn how much more complicated it actually is. So, what we do is we pair the insurance provider with the client based on their personal medical history. So, insurers, you'll get three different insurance companies will provide us what's called a pre-assessment. So, we get some medical information upfront, we send it to insurers and say, how would you assess a potential application? And they come back, one says, we'll put an exclusion for this, one says what's called standard rates, so no exclusions or loading, and another will say that they're going to put a loading on the premium, so charge more for that premium. And so we'll then go, okay, let's look at the premiums and maybe the one

with standard rates. Their base rate is more expensive, but it doesn't have an exclusion and it's, you know, we're not factoring in that loading. And so that's the insurance provider we're going to recommend for our client. So we provide that. We do all the research in terms of our process, but we make that assessment on which insurance provider. We make an assessment and a recommendation on the level of cover. And then we discuss the premiums, how to fund the premiums. Can you pay for the premiums from your super fund? How much is coming from your bank account. And then we talk about a mix of, are you comfortable with these premiums? Do we need to make any adjustments? And then we go from an application and we apply for the cover from there.

Yeah. It's a lot more complex. I remember at the end of my financial advice career, I was talking to you so often. I was like, I'm done. I can't do this. Like there's just so many changes and so many hoops and so many things to get through. And I think that insurance over the last 10 years has really, I would say, knuckled down even on just exclusions and what they will and won't accept. And I'm seeing a lot, was seeing, and I'm sure you're seeing now, a lot of people in circumstances where they actually just can't get cover because they have experienced significant health issues along the way. And the insurer is actually doing what's best for the insurer. They're not trying to crucify you. They're not trying to be rude. They're not

discriminating. They're just going, hey, Phil, well, actually you've had all these health conditions. And the reality of the circumstance is that you're probably going to get more. And it's not a very good business decision for our insurance company to then offer you cover because we're going to pay through the nose for this. Like they're managing their risk and assessing that. And that's what their job is to assess risk, make sure that they're insuring people that hopefully aren't going to get sick. But if that comes up, then they're like, yeah, okay fair game no worries we will absolutely pay out on that but I think there's this misconception that if we go and say well I want personal insurance you will be able to get it how often

are you having a conversation with people where you go look you could probably get this insurance and we could probably set up some life but like your income protection might be more impacted than not what does that look like because I feel like a few people in our community have had that question recently where they're like, well, I went to see an advisor. Obviously it wasn't you, Phil, but I went to see an advisor and they said that I couldn't get cover. And I just think that's a joke. And you go, oh, like actually they were probably right. Yeah. Yeah. So, I mean, there's a few things there. So how often do we see people get certain covers and not other covers? Yeah, we see it sometimes, but we work with all insurers. So, you know, sometimes one insurance

company will say no, but five others will say yes. So that's kind of, sometimes we see it a lot with our clients when they go to their super fund and they say, hey, can I get cover? And they get declined. And they think that's the rule across the insurance industry. They're like, I just can't get insurance. Yeah, I can't get it anymore because my super fund said no. Well, the issue is the super fund only works with one insurance company. So that one insurance company has made an assessment that they're not offering cover, but there's plenty others. Well, not plenty. There are some others on the market. There are others. I was like, there aren't that many, Phil. Yeah. And some others may be willing to accept the risk. So our job is we work with all the

insurers. So, we say, well, these four insurance companies are going to say no, but these two will say yes. And then from these two, let's look at, okay, which one do we think is a better contract, which is priced better, and then we'll make a recommendation. But life insurance and trauma insurance generally get a very similar assessment. Income protection and disability will also get the same assessment. So, you may get an exclusion on income protection and disability or TPD that your life insurance doesn't have. So, a very common one is mental health exclusion. So income protection and disability will have a mental health exclusion, but your life insurance and trauma policy won't have that exclusion. And we walk that through in our advice where we say,

hey, this is what the likely terms will be. Now we haven't applied for the cover, so it could come back as a different outcome. It could be better, it could be worse, but this is what we expect. Exclusions on income protection, disability, and maybe standard rates on life insurance and trauma. Yeah. And I think the extra value there is you have that relationship with those insurers So if you're with a client, say they are potentially going to get a mental health exclusion before even submitting it, you have the ability to call up and have a chat and go, look, what's the likelihood of this? Because no financial advisor ever wants to submit an application that gets declined because that will show up on the client's history. And even in future, when you're writing out, you know, your next fact find with a financial

advisor to get insurance again with a different provider, you have to disclose if you've ever been denied insurance before. So often financial advisors, if there is the chance of having an exclusion, will be really hands on to make sure that if for any chance it's going to be declined, they know beforehand. So we can go, you know what, let's just withdraw that, not have a decline on your history and find another way to make this work and make this happen. you just mentioned life cover, TPD and trauma insurance. So let's go to a really quick break because I feel like we've gone really deep, really quickly on income protection and why

insurance and why you do what you do. And on the flip side, let's go over why you'd have life cover, what TPD actually is and what the difference between TPD and trauma insurance is. So guys, don't go anywhere. All right, Phil, we are back. And I feel like all of these personal insurances get lumped into one sometimes. You go, do you have insurance? Yeah, I've got it through super. What have you got through super? And then you find out more often than not, they just have a really low level of life insurance, not usually trauma insurance because that's held outside of superannuation. They might have some TPD with really hard to claim benefits and maybe a two year income protection policy. So let's start here because I know this is kind of like a

easiest to talk about insurance policy. What's life insurance? Well, life insurance is just a lump sum payment if you pass away and that gets paid out to your estate or to whoever you nominate to be a beneficiary. What if I'm not married? Well, it'll get paid out to your estate. So your estate will then determine who gets it. So if you're not married, you don't have a partner, then your parents will generally get it unless your will dictates somewhere else. And if I'm looking at life insurance and I am 21, still live at home, where's the value in that versus I'm 35, I have two kids and a mortgage. So like, how do we assess how much life insurance we need? Because I think my life's worth heaps. So I just want the most amount of life insurance. Well, you can, really. At the end of the day, there's no one stopping you from getting life insurance for a 21-year-old. Why didn't you recommend more for me? That's weird.

Well, I mean, it's really a personal preference. But life insurance for that 21-year-old living at home, maybe there isn't a need. But sometimes, and actually quite often, what we see is adding life insurance brings the overall cost down because you group them all together. There's like grouping discounts. Often, it costs less to have life insurance than it doesn't have it. So, often we are telling that 21-year-old, have a million dollars of life cover because we think you need the disability cover of a million and it's going to save you overall having it. So we don't think you need it, but have it anyway. Here's all the numbers and we'll prove that it's cheaper. Yeah. And I like that part of the process as well. I used to get a lot of enjoyment out of

really getting my client to understand why I'm making the decisions I'm making because there's literally nothing worse than thinking that your client might go to a barbecue, be like, oh yeah, I got my insurances sorted. I'm a big dog. Like it's all sorted now, like best ever. And their mate goes, oh, what ones did you get? And they go, oh yeah, I got a million in life cover. And then all of a sudden their mate's like, you don't need a million in life cover. Like that's ridiculous. The important thing about advice is also educating your client to understand, well, actually I have it for a good reason. It's not because, you know, I need a million dollars if I pass away. It's because A, B, C, D and E. The other thing I like about life cover, obviously

I'm entering a new stage of life now. I'm about to have a baby, which is crazy. I now have mortgages that I didn't have when Phil, you set up all of my insurances to begin with. And we are going through the process at the moment by going through the process. I mean, I have been avoiding Phil's emails for the last six months, but we're going through the process at the moment of increasing my husband's and my life insurance and income protection and trauma and all of that fun stuff. But my, I guess, responsibilities are much higher now, but also a conversation that I like having around life insurance is really that legacy piece and going, well, actually I can leave my family and my friends and, you know, the world in an even

better place than it was beforehand. What does that look like? Are these conversations that you're having with clients often, or is it just me because I'm a little bit hippy dippy? In terms of legacy? Yeah. Yeah. I mean, it's something I haven't factored in too much. For me, life insurance is just, as you said, a hygiene factor. If you've got kids, you've got a mortgage, it's kind of a no-brainer.

It's cheap, comparative. It's probably the cheapest insurance you'll ever have in your life. So it's comparatively cheap and it just makes sense. If you've got a mortgage, you've got kids. It's kind of a no-brainer. But in terms of that legacy, it's probably something I'll have more conversations these days because, as I said, at the start of this year, I met with a friend who's about to pass away.

and it was so important for him to have a legacy for his boys. He was allocating his super balance into a trust fund for his boys, and the insurance payment was for his wife to pay off the mortgage and to afford the lifestyle of being without him. Historically, I'm very pragmatic. It just makes sense. This is the cost. I'm very black and white as well. It makes sense. Just do it. Well, it makes sense, but then also, if you want to take it a step further, hypothetically, something happens to me, I don't want to leave Steve with a mortgage that is going to be really hard to pay off because right now we're a dual income household, you know, we both contribute to this.

I don't want to leave him with a child that he goes far out, like daycare is so expensive, but I need to go to work to provide for this family. But if I stay home, like I don't want to leave this situation, it won't ever be by choice. But if I hypothetically did leave the situation yesterday, I want him to be able to be as successful and thrive as much as possible after I'm not there. Whereas if I didn't have this insurance, my husband would probably have to sell the house, probably change all of our plans around what education looks like, about where we want to live, about what we want to do and make his life

significantly harder. It's obviously going to be the hardest ever not having me fill. But on top of that, it's just kind of like the peace of mind knowing he would not have to stress about the financial aspect of it. And if I can't be there, at least I've provided that. So I think for me, that's really important. And legacy, you know, it doesn't come in the form of like, oh, Phil, I need a million dollars worth of cover because I want a whole heap of this money to go to the lost dog's home. It's actually, I want to leave a legacy where my children and my family know that I looked after them even when I couldn't be present. And I think that that's a really cool part of the, to me, life insurance conversation. Yeah. And the other thing to note, you know,

as you talked about, you and Steve are contributing collectively, financially to the household. But something I just want to call out is if you're not equally contributing financially to the household, it doesn't mean there's no need for life insurance. Exactly. I'm glad you brought this up. You'd be screwed without her. We're increasing her life insurance at the moment because if I didn't have Kate, she went overseas for two and a half weeks last year and it was chaos. Me and the girls had a joke about all the dad fails I did. The first day I left the lunch box at home for our youngest. And so I got a call from the school saying, hey, your kid does have no, Harper's got no food. And I was like, okay, cool. I better go and do that. And just the chaos

that that was for two and a half weeks. And there was no emotional baggage. I was extremely wrapped for Kate. She was having a good time. But if she passed away, we would have those dad fails times a million. And so it's not just about, oh, we're both financially contributing. It doesn't matter about the financial contributions. Life insurance is incredibly important and if not more important for someone who is, for my case, looking after the girls full time. We're literally going through increasing Kate's cover. For good reason. Because she does six million things that you do not, my friend. And I used to have these conversations where couples would come to me and they came to me with the, I guess, aim of getting their husbands or the primary income earners

income protection insurance enforced. And you'd go, all right, well, that makes sense. Let's have that conversation. And you'd kind of then turn your chair around and be like, and what about you? And they'd be like, oh, no, I don't work. It's all good. And I'd be like, sorry, I'm pretty sure, don't mean to be rude, person who's primary income earner, you're more expensive to replace than them. Because like if the primary income earner, and please don't get me wrong, like this isn't a conversation about household chores and the division of labor and all of that. It's not actually about that. But if you're in a circumstance where you do have someone at home, they're the taxi driver, they're the chef, they are the housekeeper, they are the educator,

they are the childcare, they are literally everything under the sun. And for you to replace that person is, I promise, way more than usually what the primary breadwinner's income is. And that's why I look at it and go, TPD, trauma insurance, life insurance for that person is really important. Obviously, if they don't have an income to protect, you're not going to be able to protect that. But insuring them in every other way is so essential because it's going to keep your life on a pathway that you choose if something that you choose not to happen happens. That's right. And for the main income earner, they've got income protection to carry a lot of the load for that loss of income. But if you're not working and you're not earning an income,

you can't get income protection. So that's why these lump sum covers, so the life TBD trauma, they're so much more important for that non-working partner because there's no income protection. Yeah, exactly. All right. Let's talk about TPD insurance. That is total and permanent disability. What is it, Phil? Why would I get it? So if you're totally and permanently disabled, so if you cannot work ever again because of anything, health, mental health, physical health, like any reason you cannot return to work, you will get paid a lump sum payment. So it's just a once-off payment that you'll get paid. There are some TBD policies that are paid over six years and they're becoming a bit more popular these days. Some super funds have that. I personally

don't love it, but it's just a once-off payment, which is just a lump sum payment. And we normally pair that with a life insurance. That actually reminds me of the conversation I had last year on the podcast with my friend Rhiannon Tracy. And if you haven't listened to that, she has an Instagram. She is an influencer. She is a coach. She does a whole heap of inclusion modelling and also has her own rehab facility because Phil, TLDR, she went overseas with her mum to Bali when she was much younger. I think she was 20. She dove into a pool in Bali, Brokeneck, and she is now wheelchair bound and unable to walk, unable to do all of those things that a 20-year-old should have been able to do. And she had insurance, but she didn't

have much and she spoke about the ongoing cost of what her disability costs her and she's like even if I had top level cover like my disability over my lifetime calculated out will cost me 11 million dollars because all the things that need to happen in and around like even her wheelchairs and you know accommodations that needed to be made to her home and you know doorways that need to be wide enough and ramps and all of those things that need to be taken into consideration that's what you're kind of talking about when it comes to total and permanent disability making sure that you've got the cash to make you comfortable as well as you know pay for care and make sure that all of that is well and good but to me I just remember being like it what like she calculated

out on the podcast feel what it costs for her to go to the bathroom each year yes I listened And I just remember being like, what do you mean? It costs more than $80,000 a year. And she's like, well, that's just what it costs in catheters and, you know, support for me to actually just go to the bathroom. And I just go, holy snapping ducks. Like that's so expensive. But these are things that if you've never been through it, you don't think about. Why would you think about that, Phil? So I think that this is where it's important to have something like TPD and have that in force because it's just going to help so much with those rehabilitation and living costs that are essential.

Like you don't have a choice. If you're in a wheelchair, you're not going upstairs. Who's paying for that ramp? It's not someone's going to come around and build it because they're nice, unfortunately. The last type of insurance we're going to talk about today is trauma insurance. And I do feel like this one sometimes just gets overlooked.

Often people are like, oh, it's just another insurance, feel like it's not that important. Why is it important? Why do I have so much of it? Trauma is for specific medical events. So it's got nothing to do with whether you can work or not. It's got nothing to do with whether you pass away or not. It's specific medical events.

And they're all listed out in the contract. But the major ones are cancer. That makes up the majority of all claims is cancer. My sister-in-law had bowel cancer a few years ago, you know, one in eight people. And then when I went to the doctors, I saw the sign because, you know, I had bowel cancer in my family and I saw one in eight people will have bowel cancer in Australia. I'm like, that is insane. And so cancer is the major one paid out, but there's things like heart attack, strokes, MS, you know, there's a whole bunch of conditions that's listed on trauma or

critical illness. And that for me is kind of the second most important. Depending on life stage and everything, life insurance is very important. Income protection is my number one. Trauma is kind of my number two because it is the most claimed on after income protection. And it's So important because, as I said, my good mate who had pancreatic cancer, super healthy, 42 years old, nothing was ever going to happen to him and he had blood tests for months and months and months. He knew something was wrong but he just couldn't work it out. The doctor's like, you're a hypochondriac, get lost.

I hate how on top of it he was and then he still got the worst possible outcome. And he found out stage four pancreatic cancer after spending nine months of blood tests going, I know something's going on. So that, for him, he was able to get paid out a trauma claim because he had his trauma insurance. We've got clients that I talked about with four months after the policy was enforced, found out she had breast cancer. There is not anyone in Australia who doesn't have an experience with cancer in their family or friends. And so we all have experiences with these medical events that will pay out on trauma. Trauma just can't be paid from by your super. So most people think,

I've got insurance sorted out, my super's got it covered. For trauma, your super will never have it because it just can't. Everybody assumes that when you are getting your personal insurance set up, you can hold them all within super. And that's just not the case. It's interesting as well, because I feel like trauma sometimes with clients, and I don't know if you found this, but I did when I was an advisor. You'd sit down with clients, maybe you hadn't heard from them in a year, and you'd finally have your like annual catch up and you'd be like, how are you? What's been going on? Like what's changed? And they go, oh, not much. They like, you know, we've moved or we've done this or that. Oh yeah. And you know, Bill had a melanoma cut out and you go,

wait, what? Oh yeah, it's fine. Like, you know, they caught it. They did a little bit of this, that, the other major. And I was like, you know, that's a trauma claim, right? Like you can get paid for that because often in the trauma space, when you get that policy, there's obviously categories of what type of trauma you experience. And it was obviously a lower one. Bill's fine, don't worry. But I go, can you let me fill in the claim, sign these forms here? Can I get permission to get all this information from your doctors, here's $40,000 for you. Yeah. And they would be like, wait, what?

And I'd be like, well, that's the value of having trauma, right? Yeah, it's 20%, 25% of the trauma amount gets paid as a partial claim and happy days. Yeah, exactly. Wham, bam, thank you, ma'am. It doesn't wipe out your insurance. You carry on paying your premium. And if something else happens down the track, you can claim again. And I just look at it and go, this is where it's so important to understand because I

feel like at the moment, especially because I'm in my 30s now, my friends are starting to experience health events that, you know, when I was in my early 20s were like, ah, that'll never happen. And then you drink yourself into oblivion or don't wear sunscreen. And I think especially being in Australia, making sure that you not only have the cover to make sure that you're okay, but you understand when you can claim, because I can almost guarantee there are so many trauma claims just floating around by people that have the trauma insurance that didn't know they could claim on it, right? Yeah. And we now have a good friend, and he won't mind me saying this, but Glenn James. Oh yeah, Glenn James? He had a melanoma cut out. Oh yeah, he posted on Insta

about it. And 20% of his trauma payment got paid out and happy days, you know, 20 grand was in his bank account. I remember him joking about that actually, because like, obviously we, as I guess the background group of money content creators, talk quite often. He's like, yeah, yeah, don't worry, I'm getting a cut out and I'll get paid soon. And I was like, this is not how you should see it. But like in reality, like make hay while the sun's shining, right? Like you're going through this terrible experience. Like at least you're getting something out of it. One of our team members as well actually had a cancer scare this year. It was interesting situation, but like a cancer scare had operations and she's okay now. She's fully clear. Had she not worked in

insurance, she probably wouldn't have assumed that she could get paid out of claim because it wasn't full-blown cancer. She wasn't going through chemo or anything. It was just a bit of a scare, you I got stuff cut out and she's all good now had she not been in the industry and also had I not called up the insurance company and said, hey, you better pay out this claim. Strong on them a little bit. I feel like when people are in our wheelhouse, whether they are, you know, our staff or our clients, you're like, hold on, no, no, no, I've got some sway here. I feel like it's like a financial advisor power trip. We're like, we don't have a lot of power, but like when we do. Give me a stiffer power and I'll use it. And, you know, same with our friend with a terminal

illness claim. He's in the industry. So a lot of people know him. So I'm like picking out the phone with anyone who will pick up the phone and say, get this paid out as soon as possible. Because you know who it's going to and you know their family, you know their situation. So get this paid. So, you know, there are some times you've got to push the envelope a little bit. But we got paid out a full trauma claim. And for her, it was incredible. Like she's cleared off her mortgage now. Oh my gosh. And almost better than that, she doesn't need to pay her trauma premiums anymore because they were costing an arm and a leg for her because she had smoker's rates and everything. So she cleared off her mortgage. And unfortunately for me in the

business, she's gone, well, I don't have a mortgage. I'm going to go travel around Australia for six months. Oh, so now you've lost her. Yeah, I've lost a team member. That's what you get for looking after people, Phil. I was like, I mean, it's incredible because now they're living their best life and her husband, who's worked every day. He's never taken a break from when he was 17 years old. He's got six months of long service leave. He's taking that time off to travel around Australia and they're going to live their best life. And yes, that money wasn't essential because she didn't go through chemo. She didn't go through months and months of treatment for it, but she met the criteria

and it's absolutely changed her life. I feel like it's a very funny, I guess, paradigm to go arguably as much as that was literally traumatic also one of the best things that could have happened because it's literally shifted how her life works and what her lifestyle looks like and that's you know never a selling point for insurance but it's so nice to know that if you go through something traumatic and so traumatic at that you're not going to be in a worse off position because a lot of the time if you go through this and you don't have that support you're out because you know you might have exhausted your sick leave and your boss might not be Phil Thompson so he's probably not as kind you know you would have had to take a whole heap

of unpaid leave you're taking a step back in your career like everything's just a bit up in arms you're probably even more stressed like I am going to start looking into doing research around the stress levels of people experiencing significant trauma like medical trauma and whether they have insurance or not because I could almost guarantee that if you don't have it and you're going through that circumstance, the outcomes would be worse because you are literally stressing and increasing your cortisol levels and like having a really awful time as opposed to when you feel supported and you know, you know what, all of that is covered for right now. I just need to focus on getting better. So I think that there's a lot to it, but this conversation I think has

been really helpful. I have adored it, but what are next steps for people who have listened to this and they're like, well, I don't have life insurance. I haven't set this up. I don't even know what it is. What do we do and who do we go and talk to? You're like me. Well, yes, me. The short answer, go to sky.com.au. But go check out your super fund. See what you've got there because that's not junk cover. Don't ever cancel that. Don't cancel it, no. Before going and speaking to a financial advisor. And then speak to a financial advisor about it. The reason you speak to a financial advisor is because going direct, there's only two insurance

companies who will sell good products direct to the consumer. Now, why don't all insurance companies go direct, it's exactly like Cadbury chocolate. I don't go to Tassie and go to the Cadbury factory and buy my block of chocolate. I go to Coles. It's distributed through a third party. Cadbury make more money, Coles make money, and it's more convenient and better for me because it's a cheaper product. I don't need to get plane tickets. So that's actually why insurance companies don't sell direct, or very few do. So it's better to go through a financial advisor. Also, financial advisors can structure it in a much more tax-effective way. And tax-effective sounds sexy, but it's really just simple. Financial advisors can set up your insurance

so it's paid from your super fund, but not set up by your super fund. So you can move super in the future, but your super fund can still pay the premiums and it's not locked to that super fund. That's what I do, Phil. You're a smart cookie. I'm not my financial advisors. So that's why a financial advisor is the best way to get this done because they can structure it that way. And there are a whole bunch of other sexy features and benefits and I won't go into too much. But go and speak to a financial advisor after having a look at your own super fund

insurance. Most super fund insurance, you'll have maximum of $250,000 of life in TBD. Now, for most Australians, that is completely underinsured. So, the superannuation regulator came out and said, super funds are doing an inadequate job when it comes to insurance. And when you look at the biggest super funds in Australia, they give incredibly low levels of cover because it impacts the level of funds that people have invested, that they're charging fees on. So, there is a potential conflict between the super funds and the insurance premiums. So, go and speak to a financial advisor and they'll help communicate what you need. If the advisor isn't asking you about your medical history before they recommend an insurance

provider, for me, that's a red flag. That's a massive red flag. Because the differences between insurers is huge based on your personal medical history and it should be chosen based on your own personal medical history. So that's my recommendation. Find out what you got through super, then go and speak to a financial advisor and making sure that they're having a look through your medical history. I think that's also an important point that you bring up actually about the medical history, because I think sometimes you go, hygiene factor, great. Oh, chat to Phil, I'll get my insurances sorted. But I used to say when I was a financial advisor that I was always in the most privileged position because you get to know your

clients deeper than anybody else, right? Like you go to your GP, they know all your medical history, but they don't know your goals, your values, what's going on. When you are a financial advisor, you're in this circumstance where you're talking about these deep personal things with clients, like, hey, cool. Well, how do you feel about your wife? Because, you know, if I'm setting up this insurance and you actually want to circumvent your wife and have it go straight to your kids, if something happens to you, we need to have that confidential conversation. You're going to have to tell me about your personal medical history. I know it's a bit uncomfortable, but don't worry, I'm an advisor. I literally talk about this stuff every single day with you, with insurers,

with my team, like this stuff, I'm not judging you. I don't care what you've done, but you need to disclose this information. And I always found myself in this position where I'd be like, far out. Like I have such a deep knowledge of clients, but I think you also need to expect that too, as a client, you're going to be asked some questions like, why are they asking me that in a fact find but the reality is so that you can be in the best possible position because there's nothing worse and thankfully it's never happened in my business but I know it's happened to other advisors where they've gone to claim and then all of a sudden the claim's going to be denied because the patient or the client didn't disclose something really important because they're like

I didn't really want to talk to my advisor about it it's all out on the table and to be honest we don't care what you do how you do it where you do it or what that looks like we just need to know to put you in the best possible position. And then down in the future, we have this deep relationship with you. If something happens, we're the ones that have got your back to make sure that that happens. So you're not doing the paperwork. You're not following up when you actually need to be focusing on getting better and dealing with you and your family. So I think it's, yeah, to me, I kind of miss financial advice. You can get back in being an insurance advisor. No, it's all right. I've got a job. So far, so good. Like I've just got this little podcast.

We're doing all right. You know what? I'll just flick all my clients to you still. I went to a cafe yesterday with Gabby and we were at the cafe. What are you doing hanging out with my team during work hours? We went to a cafe where we first caught up for coffee. Oh, really? And you showed me she's on the Money Facebook group and I had 3,000 members.

What cafe was that? It was Pinky in Ivanhoe. Oh, in Ivanhoe. My mind was blown when you had 3,000 members in the Facebook group. Yeah, and I was like, it's just little. I don't know what to do with it. So you're doing okay. We were all right?

Yeah. All right. Well, it has been a pleasure having you on, Phil. Obviously, if anyone is interested, visit sky.com.au. Sky is spelt S-K-Y-E. And I will obviously make sure that all of the information is in the show notes so you don't have to remember that at all. Thank you so much for coming.

We love you. And I will see you for a Friday episode on Friday. Bye. 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. If you do choose to buy a financial product, read the PDS, TMD

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