Hot Issues
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SMSFs: Our 'hardest' jobs
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ASIC issues alert over big gaps in SMSF trustee knowledge
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Super savings gap for women stuck at 30%
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Statistics for all Australians
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Super set to play bigger retirement role
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Why SMSFs want estate-planning advice
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The power of financial role models
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Assess your retirement financial resources
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Cryptocurrency audits tipped to increase this EOFY
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Time to check your risk exposure?
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Some general interest stats on SMSFs
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Check trust deed to protect super in estate planning
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Survey reveals strong opposition to retirement system changes
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Australia by numbers – Update
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Federal Budget 2018 – Overview
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Your Budget
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4 components of our 2018 Federal Budget
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Tools to help you manage your financial position are available on our site.
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New rules capture SMSFs trading big with cryptocurrency
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Common EOFY slip-ups flagged for SMSFs
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Beware residency rules if moving overseas
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99 pct of SMSFs missing global opportunities
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How to plan for a better retirement
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Australia by numbers - Update
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Determine your retirement goals
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ATO issues update on cryptocurrency compliance traps
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How likely is a global trade war?
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Gig economy spike prompts calls for super policy changes
Article archive
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Quarter 2 April - June 2018
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Quarter 1 January - March 2018
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Quarter 4 October - December 2017
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Quarter 3 July - September 2017
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Quarter 2 April - June 2017
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Quarter 1 January - March 2017
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Quarter 4 October - December 2016
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Quarter 3 July - September 2016
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Quarter 2 April - June 2016
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Quarter 1 January - March 2016
Quarter 4 of, 2016 archive
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Investor habits: The good, the bad and the ugly
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Keeping finances in the family
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The inter-generational financial squeeze
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Merry Christmas for 2016, a Happy New Year and a prosperous 2017.
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ATO set to clamp down on range of super issues
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SME retirement plans in jeopardy, research finds
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SMSFs show restraint in hot residential market
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Investment's building blocks - always worth reinforcing
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Warnings issued on traps with CGT transitional rules
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Meet SMSFs' early and late arrivals
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Beware, the ATO is on the hunt for lifestyle assets
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'Brexit means Brexit' means what?
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SMSFs tipped to be hardest hit by pension changes
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SMSF assets hit record, but funds still hoarding cash
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Markets caution advised as economic bubbles loom
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Stretching retirement income
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Some financial terms explained
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Market Update – September 2016
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Checking in on our 2016 economic outlook - and looking ahead
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Making a fairer and more sustainable Superannuation System
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Going undercover
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‘Winners and Losers’ from new super proposals
Going undercover

 

The holding of adequate life, total & permanent disability and salary-continuance insurance is a critical part of sound personal financial and wealth management.

       

 

Unless our personal insurance cover is sufficient, the death of a partner or loss of a job can undermine the ability to maintain our family's living standards, pay debts and to keep savings at least intact.

The list of personal finance implications – let alone non-financial issues – of being underinsured seems almost endless.

Yet the recent Underinsurance in Australia 2015 report, published by actuaries Rice Warner, calculates that the median level of life cover meets just 61 per cent of basic needs. (These needs are defined as the minimum amount required to pay all non-mortgage debt and sustain current living standards.)

Moreover, the median life cover is calculated to meet just 37 per cent of income-replacement level of insurance. This is the level necessary to replace the expected net income of the insured and maintain living standards.

And the median levels of total & permanent disability (TPD) cover is calculated to meet only 13 per cent of needs while income-protection cover will meet just 16 per cent of needs.

The level of underinsurance for parents with young children is much higher than suggested by the median levels of cover, the report emphasises.

Millions of Australians of course gain life, TPD and income-protection insurance through their super funds' default cover.

Unfortunately, a fundamental trap for super fund members is to assume that the default cover is adequate for their families' circumstances. Chances are it isn't.

Rice Warner calculates that the median cover of super meets only about half of the basic life cover needs for households without children and a much-lower proportion for families with children.

Significantly, the report stresses that default cover through super is intended to provide for only part of a member's insurance needs. This point underlines the need for individual members to take the initiative to ensure their level of insurance is sufficient – perhaps with the guidance of a financial planner.

A useful starting point may be to consider feeding your family's details into several online insurance calculators provided by large super funds. This should provide an insight into the level of cover needed and the possible costs involved.

 

Robin Bowerman,
Head of Market Strategy and Communications at Vanguard.
14 September 2016