Prepaying Private Health Insurance Before 30th June – Case Study

Yesterday, we explained what is going to happen to the Private Health Insurance rebate from 1st July, 2012  – a sliding scale based on age, marital status and income levels.

Today we will look at the details.

These are the new rates as provided by the ATO’s website

 

Although we didn’t mention it yesterday, note also the sliding scale of the Medicare levy surcharge.

The other important matter we should mention is that how the ATO defines income and how YOU define income might not tally, so be sure to check out this link to the Australian Tax Office . If you are still in doubt contact your tax adviser or your Wealthwise financial adviser.

Case Study

Let’s have a look at how much you could potentially save by prepaying your premiums before the 30th June, 2012.

A family currently paying premiums of $233.33 per month or $2,800 pa (after taking into account the 30% rebate) would keep this level of premiums if they prepaid. If they didn’t, their premiums for 2012-13 would depend on their income level.                                                                             

(IMPORTANT: Remember this is income level according to the ATO’s criteria).

 

 

Unchanged

Tier 1

Tier 2

Tier 3

Family Income

$168,000 or less

$168,001 – $194,000

$194,001 – $260,000

$260,001 or more

Rebate

30%

20%

10%

0%

Annual Premium

$2,800

$3,200

$3,600

$4,000

 

Potential Savings

 

 

-

 

$400

 

$800

 

$1,200

 

 As can be seen from the table above, for a family with an income below the new $168,000 threshold, there seems to be no potential financial gain from prepaying. However, if you are unsure about any information in this article, phone your Wealthwise financial adviser on (08) 9380 6333 or get in touch via the Contact Us form on the website. Alternatively, talk to your existing private health insurance provider.

Continuing with the the end of the Financial Year theme, tomorrow we look at “Tidying Up Your Super Before 30th June”

 

Disclaimer:

The information in this article is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. It should not be construed as financial, taxation or legal advice.

Before acting on the basis of this information, you should consider its appropriateness to your own objectives, financial situation and needs. You should also obtain and read a copy of the relevant Product Disclosure Statement before making any decision to acquire a financial product.

 

The True Value of Insurance

KEY POINTS:

• Most super funds offer insurance. However, it’s important that you ensure the cover is enough for you and your family.

• As your life changes, your insurance policies may need to change with you.

• We’re here to help. We can review your policies with you.

Research shows that only around 16% of people actually have life insurance.(1) Also, only 6%(2) of consumers have income protection, while one in six men and one in four women are expected to suffer a disability from the age of 35–65 that leaves them away from work for six months or more.(3) While these statistics can be confronting,the flipside is that checking, maintaining and possibly upgrading your insurance coverage can provide tremendous peace of mind.

What’s your most important asset?

Most people have insurance for their home and motor vehicle, but fail to cover their most valuable assets – their life and their ability to earn income over the long term.

Which policies are relevant to me?

There are four main types of personal insurance:

• Income protection – helps you meet your financial commitments by providing regular payments if you are unable to work due to sickness or injury.

• Trauma cover – provides a lump sum payment after the occurrence of a serious medical condition (such as cancer, stroke or heart attack).

• Disability cover – total and permanent disability (TPD) cover provides a lump sum payment if sickness or injury leaves you totally and permanently disabled.

• Life cover – a lump sum payment to your nominated beneficiary in the event of your death or a terminal illness.

How can I be sure I’m covered?

Given the various types of insurance available, it can become overwhelming or confusing about what is best for you. You also don’t want to be stuck paying for cover that you don’t actually need. We can review your polices with you and provide practical and ongoing advice on personal insurance.

I already have a personal policy, isn’t that enough?

If you already have personal insurance you may appreciate some of the peace of mind it can bring. The most important thing is that you keep your policy in mind and not just tucked away in a drawer. Do you know how much you’re covered for? As your life changes, it’s vital to ensure that your policies change with you. If you get married, take out a mortgage or have a child, take a look at your coverage. You may find that you are still covered sufficiently or that you wish to upgrade some or all of your policies.

But aren’t I covered by my super fund?

It’s true that most super funds offer some level of income protection and death or disability cover. However, it’s important to read the ‘fine print’ and ensure that the coverage you have is enough to provide for your family if the worst were to happen. In some cases, the default coverage simply isn’t enough if you have children or other family members in your care. For example, the average amount of lump sum death cover is just over $150,000.(4)  Would this be enough for your family? Also, policies like income protection may have waiting periods for payment. Therefore, you need to know what these waiting periods are and how long you and your family can survive on a reduced or non-existent income.
Things like mortgage payments, car repayments, school fees and everyday expenses keep occurring no matter what. If you were to become sick, injured or if the very worst were to happen, you would want your family to be able to carry on as normal.

Case study – Tom’s story

Tom is a successful lawyer and is married to Janette. He has worked hard over the past ten years to accumulate valuable assets. To support his desired lifestyle, Tom decided on a $300,000 trauma policy to protect him against cancer and heart attack.

Unfortunately, last year Tom was diagnosed with prostate cancer and was unable to work for six months while he underwent treatment and recovered from the illness.

Tom was paid a trauma benefit of $300,000 from his policy which assisted with Tom’s recovery. The insurance policy replaced his income and paid his medical expenses. Without it, Tom would have had to rely on Janette’s income.

Tom continued to pay his annual policy fee and 12 months after the initial payment of the trauma benefit, Tom bought back his $300,000 trauma policy at standard premium rates.

Unfortunately, six months later Tom had a serious accident, suffering a major head trauma.
Tom and Janette were relieved that, as a result of the trauma policy, he qualified for another trauma benefit of $300,000.

Again, they were able to meet their expenses and Tom was able to recuperate with some peace of mind.

 

Source: CommInsure, Protection and peace of mind for life (based on CommInsure average claims in 2008 calendar year), page 18, 2011.

1 Roy Morgan Research, 6 months to April 2009, Australian population aged 14+.
2 Roy Morgan Research, see footnote 1.
3 Institute of Actuaries, Table IAD 89-93 – white collar males and females.
4 CommInsure, Protection and peace of mind for life (based on CommInsure average claims in 2008 calendar year), page 9, 2011.