Should I?

The teen years are a great time to get life insurance. Buying a policy at this time offers the main benefits of:

• Guaranteed future insurability – most chronic conditions do not show up until after the teen years, and once you have a policy most insurers cannot cancel it. If you have a family history of particular chronic conditions, this aspect is especially important.
• The opportunity for much cheaper life insurance for your teen later in life if you choose level premiums.
• For younger teens, their life insurance could help YOU through a very difficult grieving time if you were to lose them.

How Much?

Life insurance for teens is generally very cost effective, unless you have taken the level premiums strategy. It needs only be for a nominal amount if the purpose is to guarantee insurability in the future; the minimum for many insurers is around $100,000.

What About?

If you are buying for future insurability, make sure that the policy you choose offers that option. You should also make sure that your teen won’t need to be switched to an adult policy and risk losing that guarantee; some policies will only cover teens until the age of 16 or 18, at which time they must move to a different structure.

If you’re buying to help make their life insurance cheaper in adulthood by paying the initially high level premiums, you need some certainty that they’re going to keep up the policy … or all that extra cash will have been wasted.

A Low Rate … Compared to Other Non-Conforming Home Loans

Don’t compare the interest rate for your non-conforming home loan options to those advertised for standard variable loans. Non-conforming loans always have higher rates, because you are considered higher risk by the lender.

The Option to Reduce the Rate Later

While you can always refinance your loan in the future, it can be convenient to find a non-conforming home loan that offers you the option to reduce your interest rate once you’ve established a good repayment history, or you have the documentation that would make you eligible for a standard loan.

Removal of Lender’s Mortgage Insurance at Lower LVRs

In the ideal non-conforming home loan, the Lender’s Mortgage Insurance (LMI) will cut out at a certain Loan to Value Ratio, just as in a standard home loan. Having a lower Loan to Value Ratio, cuts the lender’s risk substantially and this should be reflected in the removal of that insurance. However, the required LVR may be lower than the standard 80% for ordinary home loans.

Ability to Consolidate Debt

A good non-conforming home loan product allows to consolidate your debt into your home loan to take advantage of the lower interest than on personal loans or store cards. Around 60% of non-conforming loans incorporate some form of debt consolidation.

Flexible Arrears Schedules

If you need a non-conforming loan because your income is variable over the year, it would be wise to choose a lender which doesn’t report you to a credit authority the first time you run into 30 days arrears.

Non-conforming home loans are out there, and the good ones will not bend you over a barrel before giving you a dollar. Be as selective about your non-conforming loan as the bank is about you!

The $70,000 Sums

What is the dollar figure of $70,000 savings based on? The assumptions inbuilt into Choice’s sums include:

• $300,000 loan
• Standard repayments (no extra repayments)
• 25 year home loan term
• Comparing the average rate for the Big 4
• To the cheapest generally available alternative

Looking at these assumptions, we can see that the $70,000 figure is actually fairly fluid. Every choice you have made with your home loan affects your potential savings.

Save More Than $70,000 By …

A $70,000 saving sounds exciting. The reality might actually be far more exciting than that, if you have a larger loan or make extra repayments! You’ll save:

• MORE, if you have a larger home loan
• MORE, if you make extra repayments
• MORE, if you cut down your loan term (which equates to making extra repayments)

Save Less Than $70,000 If …

However, if you had already done some home loan comparison and have a fairly good deal, your actual savings may be much less. You’ll save:

• LESS, if you currently have a home loan interest rate cheaper than average with the big banks
• LESS, if you don’t find the cheapest generally available product

Remember too that it is essential to check the comparison rate (which includes all base. Ongoing fees and charges) when refinancing your home loan, not just the base interest rate.

For many of you, that seemingly pie-in-the-sky figure could well be reality, with a simple home loan health check!

To help make sense of it all, today we check out the experts’ views on Australia’s best life insurance policies for young professionals!

Accelerated Protection by Tower (TAL)
This policy was rated as outstanding value (5 stars) by Canstar Cannex’s research team. It offers base features of stepped or level premiums and the security of guaranteed future insurability – which should be a must in any life insurance policy you plan to keep in the long term.

No medicals are required if you’re under 45 and need up to $1 million of cover.

You can also package this life insurance with total and permanent disablement.

Comminsure Life Cover

Even up to age 61, if you have modest life insurance benefit requirements you can access the Comminsure policy with no medical!

The policy has a staggered system – if you’re up to 50 and require < $1 million of cover, or aged 51-60 and require <$600,000 of cover, or 61+ and require <$300,001 of cover you can start the policy without a medical. It was rated at 4 stars by Canstar Cannex.

Asteron Lifeguard Life Cover

Asteron (along with BT) provides some of the greatest flexibility of any of the companies in Canstar’s 4-star category. Stepped or level premiums, guaranteed future insurability, funeral benefit and financial planning benefits are all available.

Asgard Personal Protection Package

Another of Canstar’s illustrious 4-star insurance policies, Asgard misses out on the level premiums option and financial planning benefit but scores highly anyway.

Asgard has fantastic transparency on fees – if you download the Product Disclosure Statement you can get an indicative idea of your premiums instantly. The available cover is to a max of $2 million and includes a total and permanent disability option.

Remember, this is just a starting point in your life insurance research. There are literally dozens of fantastic Australian policies which are subject to a high level of scrutiny and regulation for quality standards. Keep searching by using RatesOnline life insurance comparison to get your best, lifetime, decision.

Think about it – if you are permanently injured at age 20, income protection could pay 75% of your salary until you turn 65. Therefore, the premiums are usually larger than for some other insurance types … but that doesn’t mean they are unaffordable! Today we check out some ways you can dig up dirt cheap income protection insurance.

Ask Your Superannuation Fund

Your super fund may offer a limited or generic type of income protection insurance at a lower rate. Because this is group income insurance and the premiums are averaged across the whole population, those who are young, healthy and work in low-risk jobs might not get the same discounts that others do, however.

Check Your Features

Income protection insurance comes with a substantial checklist of options and features. Each one of these will affect your premiums, pushing it either up or down. Read your PDS carefully to help you determine which features you really need and which you don’t – if you still aren’t sure, check in with an insurance adviser or financial planner.

Purchase in a Package

Need life insurance or trauma insurance as well? Most companies offer all of these types of policies, and might give you a multi-policy discount for having all three of them.

Quit Smoking

A golden way to get a discount on your income protection insurance, but also for your life insurance and health insurance. And it won’t just be cheaper insurance that creates wiggle room in your budget when you quit smoking, either.

Choose Stepped Premiums

Stepped premiums go up as you age, so will cost less now but more later. If you only plan to keep your insurance in the short term, stepped premiums might be the cheapest and most sensible choice.

Increase Your Waiting Period as You Build Sick Leave

Policies with a longer waiting period (time before benefits can be paid) can sometimes provide cheaper premiums, and you can have it without compromising your protection if you increment your waiting period up as you accumulate sick leave.

Today we check out the ins and outs of this aspect of home loans to help you understand how to use it as a strong financial ‘lever’!

What is My LVR?

You can calculate your LVR easily using the following formula:

Your loan amount (divided by) your property’s value (multiplied by) 100 = Your LVR as a percentage

If you want to buy a house worth $300,000 and you have saved $50,000 deposit, your LVR is:

$250000 (divided by ) $300000 (times) 100 = 83.33%

LVR Tips and Tricks

It’s important to remember some things about your LVR which are not always immediately obvious:

Key LVR Figures

If you’re researching home loans, you should have these key LVR percentage points in mind:

The most important thing to remember about LVR is that lower is better – LVR is a direct predictor of a person’s ability to maintain mortgage repayments. Go low, and go safe.

1. Save a Decent Deposit
   A 20% or greater deposit means you can avoid paying Lender’s Mortgage Insurance, and save hundreds of dollars on your loan.
2. Look for Flexible Repayment Schedules
   The ability to repay more than your minimum scheduled repayment without penalties, and to change your repayment schedule, is absolutely critical to paying the least amount overall for your home loan – extra repayments can make more of a difference than 50 basis points on the interest rate, easily.
3. Check for ‘Professional Package’ Loans, but Assess Them5 Well
   professional package loans are theoretically lower-rate home loans offered to low risk customers with sufficient income and assets. However, it is important that you assess even professional package home loans using the same criteria as for all other loans.
4. Most Extra Features Cost Extra Money
    Many home loan features offered by banks will end up costing you extra – either in fees or hidden in a slightly higher interest rate than more basic loans.
5. But This Doesn’t Mean You Can’t Save With Them
   However, as long as you use those extra features to their full potential, you can actually save far more money. For example, if you choose a home loan with an offset account and you time your saving and spending carefully, you could save thousands of dollars on your loan even with a slightly higher interest rate.

Spend some time getting to know the pitfalls and potential of home loans in general before you take up a new one – your bank account will thank you!

The Aussie Campaign

Aussie Home Loan’s latest advertising campaign is based around the slogan “It’s Smart to Ask’. The campaign encourages consumers to rethink their strategy for getting a home loan (a virtue we’ve been spruiking since our launch!), and it has struck a chord with current and potential homeowners – leads were up by 41% for February following the campaign launch. But what does that really mean?

Using a Mortgage Broker

Aussie is a mortgage broker. The ‘It’s Smart to Ask’ campaign simply encourages the virtue of research when looking for a home loan … something that the federal government, other mortgage brokers and smart consumers have been advocating for years!

Aussie are telling us not to simply go with a home loan from the same bank that holds our transaction account, but to shop around.

Broker Limitations in Home Loan Research

Mortgage brokers offer a valuable service, but to utilise them effectively consumers need a keen awareness of their limitations. Mortgage brokers are paid by the lenders they recommend to you. So, a mortgage broker may only index and compare loans from lenders with which they have an agreement, which greatly narrows the pool from which you can find the right home loan.

So, use your mortgage broker as a jumping-off point in your research – but don’t simply take their best recommendation. There’s a big wide world of loans out there, and the right one for you could be just round the corner from your mortgage broker’s office! Compare over 800 home loans right now at RatesOnline and find the best loan for you.

Choose Your Waiting Period

Longer waiting periods mean cheaper premiums, but you must have sufficient funds (usually in sick leave or savings) to keep yourself going in the meantime.

Choose Your Benefit Period

Longer benefit payment periods mean higher premiums, but protection for a longer time. Put your imagination hat on, and ask yourself what would happen to your finances if you couldn’t work for 5 years? 10 years? The rest of your working life?

If you currently hold trauma insurance, you may have less need of a long benefit payment period. If you have TPD insurance (which may be attached to your life insurance), you may have less need of ‘to age 65’ benefit payment period.

Choose Agreed Value or Indemnity Value

Agreed value income protection sets your benefit at the time of policy commencement. Indemnity sets it at your time of claim. Indemnity is cheaper, but only suitable if your income is fairly regular. Contractors and the self-employed should choose agreed value insurance. If you make a claim at the end of your billing cycle, the insurer might otherwise consider that your benefit amount  is 75% of the $0 you earned in the prior month.

Choose ‘Own’ or ‘Any’ Occupation

‘Own’ occupation policies pay if you can’t perform the normal duties of your job, and generally cost a little more. ‘Any’ occupation policies pay if you can’t perform the duties of any job for which you are reasonably suited by education, training or experience.

Shop Around

Income protection insurance comparison services can help you quickly and easily identify the policy that is right for you!

Claim Premiums on Your Tax Return

For many income protection insurance holders, your premiums will be tax deductible. Check with your accountant if this deduction applies to you.

Make an effort to read your entire PDS and policy document and translate it into understandable English and real consequences in your situation. This time is always well spent!