Ask An Advisor: Phil Thompson – You’ll never think about insurance the same

Bryce: [00:00:18] Welcome to Equity Mates Investing, the podcast where we explore what's possible in the world of investing. If you've just joined us for the first time, a massive welcome. My name is Bryce and today we've got the first Ask an Advisor for 2024. These episodes, where we bring in the best financial advisors in Australia to give you the opportunity to ask your money and investing questions to chat through it, as always, I'm joined by my equity buddy, Ren. How are you? 

Alec: [00:00:43] Oh, I'm very good, Bryce, I'm excited for this episode. We are diving deep on one particular area of our financial lives. I would say an under appreciated, under considered area of financial lives, especially for you. So we'll get to that. Yeah. We're talking all things insurance. 

Bryce: [00:01:00] We are talking all things insurance. And we've brought in the insurance specialist. It's our pleasure to welcome Phil Thomson, director of Skye Wealth. Phil, welcome. 

Phil: [00:01:09] Thanks for having me, guys.

Bryce: [00:01:10] Now, yeah. We haven't done a lot of insurance on the show before. We have a bunch of questions that have come in from the community, but before we do, we must do our disclaimer. 

Alec: [00:01:27] We are just watching Phil's faces. Yeah.

Bryce: [00:01:31] The first time we've done that with an expert in the room. 

Phil: [00:01:33] I was actually thinking, when are you guys going to start singing it? 

Bryce: [00:01:37] I started singing in the shower. 

Alec: [00:01:39] Yeah, yeah, yeah, we were big stings, guys. Yeah, it's no big thing, but we should say yes. This is not financial advice. Whilst we are licensed, we're not aware of your personal financial circumstances. Anything you hear, any advice you hear is general advice. All this content is for education and entertainment purposes only. We need to get all of that in a next time. 

Bryce: [00:02:01] Now Phil, because we haven't addressed insurance in detail before. We've split the questions that have come through from the community in sort of two parts. The first is to kind of set the scene and really understand what life insurance is all about. And then we've got a bunch of just general ones. And as Ren said at the top, I'm in a position at the moment where I'm actively trying to sort my insurance situation out, so I'm sure I'll have plenty of questions and even off air. We know that there's a lot to unpack, so let's get straight into it. This question has come through. I'm 21 and have absolutely no knowledge regarding insurance. Where do I start? 

Phil: [00:02:39] Well, great question. And most of Australians don't. So we'll just set the same. When people talk about insurance there's kind of two main categories like general insurance is car insurance home and contents. That's not what we're going to talk about. We're going to talk about personal insurance. So and that's under the life insurance, you know, banner. And so we're talking about really four main policies. So life insurance or death cover. So that's paid out. If you pass away then there's a lump sum that's paid out. The second one is total and permanent disablement or TBD. And that is a lump sum payment if you can never work again. So you're going to be severely disabled to get paid out. The third one is income protection. So that will pay you a percentage of your income. If you can't work for either a short period of time or a long period of time, you will get paid a monthly salary. And then the last one is trauma insurance or critical illness is another term that insurers use, and that's for serious medical events. So the majority of claims are for cancer. But there's, you know, different contracts for different things like heart attacks. You know, if you've got severe M.S or Parkinson's. So there's 30 odd conditions that will pay out under that critical illness payment. So they're the four main policies that we're talking about. So yeah. Great question. Most people don't know what personal insurance is like. 

Bryce: [00:03:58] It's something that I feel like, well, I definitely don't have cover in any of those, and we'll get to that in a moment. But where do most people insure themselves when it comes to those policies? 

Phil: [00:04:09] It's a good question.My belief is income protection is the most under insured. Most superfans will set up some life insurance or some disability cover or type of a cover for you super funds, they actually got a legal obligation to make sure they're considering it for their members. So that's why most Australians will think, oh, my super's covering it. Income protection is the one that you know, if you don't have your income, we can have it as as amazing wealth creation goals as we want. But if we don't have an income, we can't achieve any of those wealth creation goals. So that's where people underestimate the insurance needs. 

Alec: [00:04:43] So I think that super question is a relevant one. It's certainly the one that I had coming into this, which is, first of all, what is in super and what isn't in super. And I had a look at my super policy before you came in this morning and I saw that I have two super insurance policies. I thought I had three, so it's always good to check. And then I guess, how should Australians think about what insurance is in this super. Is it enough? And then what? What they should be doing outside their super. 

Phil: [00:05:12] Yeah. So super, can only pay for three of those four policies that I touched on. So critical illness and trauma legally, superannuation funds can't set it up. They can't pay for it on your behalf. But life insurance, disability and income protection can be owned through the super fund. And when we talk about owning through the super fund. That means the super fund will set it up on your behalf and will pay the premiums. From your, you know, your superannuation assets. They're not doing it out of the kindness of their own heart. And so, yeah, they can set it up whether they do or not. You know, you may join a super fund and they may not have insurance. You may, move to the super fund. And if you're if there are a whole bunch of requirements where they don't have to set it up, if you're under 25, for instance, they won't automatically set up the cover for you. So those three policies are the ones that will be set up through super. 

Alec: [00:06:05] So I guess the question is for those three, should people be taking what's available in their super, or doing it outside of super or doing a bit of both? Like, how do you start that? Obviously it's going to be personal for everyone, but like, how do we even think through that question? 

Phil: [00:06:21] Yeah. So the good thing about having it through super and you can always increase it. Three it's. Three. Super. Is this. 

Alec: [00:06:28] Well, you say that, but I tried to check and I couldn't do anything earlier. Anyway, we'll have that conversation offline. 

Phil: [00:06:35] I actually looked at the super fan that you're with, and you've got to go through a manual process. It's not like clicking a few buttons and you can just automatically increase it. 

Alec: [00:06:43] That instantly vetoes me. Yeah, yeah okay. 

Phil: [00:06:45] Because the great thing about having insurance is that it will get set up on a default basis, that that automatically gives you cover. And as long as there's no terms and conditions, it will veto a claim which they can be. Then you can get paid out. Now as soon as you go and increase the cover, that's when they will go through what's called underwriting. So they'll ask you a heap of questions about your health history, your work situation, you know, your family history. And that's when they'll determine, okay, maybe we don't want to offer you cover, or yeah, we'll offer you cover at this higher premium.

Bryce: [00:07:17] How do you know that the default is enough. You sign up to a super fund. Most people, when they sign up, don't even kind of pay too much attention to the super product, let alone the insurance that's involved in that. So how does the super fund just lump you in with the default product? And how do you know that that's actually what you need?

Phil: [00:07:36] I can almost guarantee it's nowhere near enough. Almost every Australian are listening because the super funds, they've just got a formula if you're this age will give you this much cover. And because it's automatically accepted. So the insurance company doesn't want to give $1 million worth of cover for everyone automatically because then it's gonna it's going to cost a lot. And they're going to have to pay out that much claim without going through that medical underwriting. So they want to have a mechanism where there is some cover available. But super funds and insurance companies will kind of make that default level of cover really small. So if they do offer default income protection, most of the time it'll only last for two years. While you can get cover through the super fund or externally that last till age 65. So. So almost every super fund, when you look at the average mortgage in Australia and then you look at the average, you know, the default level of cover through, you know, the biggest super fund in in Australia is AustralianSuper. I think they cap at at like $148,000 for life and TBD. And if we kind of go back to just paying off the mortgage, that won't cover almost anything.

Bryce: [00:08:45] So then you're faced with a decision to, as you said, actually, then go through the process through the super fund to, I guess, get them to actually underwrite it properly or go externally. 

Phil: [00:08:55] Yeah. So there's really three ways that you can go and decide to get to get extra cover or to increase your cover. So you can go through the super fund. Now the benefit of that is it's paid via the super fund. The downside is the super fund will only contract to one insurance company. So if that insurance company is expensive or they won't offer you cover, then you don't have any options to go anywhere else. You know, whatever that, insurance provider says is the lay of the land in that environment, the second environment is going through a financial advisor, which, of course, I'm going to say is the best way. And we can we can talk about, you know, the pros and cons of of all of that. And the benefit of that is we can select any insurance provider and we can set it up so your super fund can fund that premium still. 

Bryce: [00:09:41] Interesting.

Phil: [00:09:41] Yeah. So it really doesn't matter if you're with superhero or AustralianSuper or Host Plus or wherever you are. Australian serve is an easy one because it's the they're the biggest. So Australian super their insurance provider is Tal. Now we as advisors we can set up through to external to Australian Super or we can go with anyone else. Zurich, MIA, MLC and we can still get Australian Super to fund that policy. And the biggest benefit and the reason why I would recommend most people go to a financial advisor to set it up is because if you want to move from AustralianSuper to anywhere else Hostplus. 

Bryce: [00:10:17] Your insurance stays.

Phil: [00:10:18] You can get the new super fund to pay those Premium. And so you don't need a re set up insurance or get your insurance to lapse. 

Bryce: [00:10:26] Oh nice. This is tick number one for me because I've always thought it's such a great benefit to have it in the super fund like Ren does. Because from a cash flow point of view on my budget, it doesn't like it's not saying, you know what I mean. I'm not I'm not factoring it in like I am general insurance. Yeah. So now knowing that I can go out with someone like yourself and plug in an insurer to my super fund, that actually makes a whole lot of sense.

Phil: [00:10:52] Yeah. And technically how they do it, the insurance company, they set up a super fund on your behalf, like you become a member of their kind of shell super fund, and then your super fund will just pay the premiums every 12 months. So it's a rollover to that insurance company super fund just to pay the premiums. Now they will never manage your money. They don't want to invest your money on your behalf. It's just a shell super fund just to get premiums from wherever. So that's why if you're with AustralianSuper, we can pay it to the insurance provider who moved to Hostplys then, you know, we just sign a new form to say. Roll the money over to the insurance provider again. 

Alec: [00:11:30] Now, when we were talking about this beforehand, we were trying to figure out the the like, I guess, the benefits and the costs of paying through your super fund and paying personally because some of these forms, correct me if I'm wrong, some of these forms of insurance, tax deductible, if it's income protection. 

Phil: [00:11:48] Exactly. Income protection is tax deductible. 

Alec: [00:11:50] So is it better to do it through your super fund or is it better to get the tax deduction. 

Phil: [00:11:55] Yeah I mean it's really a personal choice. So I mean of course it is. But the reason why I say personal choice, the way we think about it is if your income is over, you know, a certain level where you're paying a higher marginal tax rate and you've got the cash flow permitting, then you can pay it outside of super, and it's a good way to do it. The reason why you can still pay it in sort of super, even if you're at that high marginal tax rate, if you do have some superannuation contributions available. Now, just a whole bunch of technical terms here. But if you are not at your cap, then contributing to super to pay those premiums will give you the same net tax benefit. So it's only when you're maxing out your contributions year on year, and then your premiums will be impacting the amount that you're investing in that fund. But then again, if you set up through a financial adviser, what we do in that scenario is we can do what's called a cancel and replace, so we can set it up inside the super initially, run it for ten years, and then you get to a point where you start to max out. We can still keep that contract. And just if we cancel and replace and hold it outside. So we just change the ownership structure. But you can only do that through an advisor, super funds that just don't have a mechanism to allow you to pay out. So because they're not managing that. 

Alec: [00:13:16] Yeah. Yeah yeah that's interesting. All right. Well I never really considered going to an advisor, but I'm starting to say yeah. So this is what you want. 

Bryce: [00:13:24] To be clear on that point. To be clear on the point of setting it up outside, but getting the super fund to pay it, you still need to contribute to the super fund for it to be paid or it just draws it out of the balance. 

Phil: [00:13:39] It just draws it out of the balance. So like, you know, if you're on parental leave then the balance of the fund will be refunded. So you don't actually need to contribute to you. So you better keep paying it. But that's the beauty of doing it this way. Because, you know, people buying their first homes and cash flows taught. So what am I supposed to pay for it? But long term we don't want this super balance just eaten away by the insurance premiums. So that setting it up this way you can go one, two, three. I'm not contributing to my super fund to cover this cost. And then year 4 or 5 six you can actually contribute twice as much. Again assuming you got caps to then make up for that lost payment in the past. But if you're paying it all that sort of super, you either pay your friends or you don't. And you have insurance or you don't. 

Alec: [00:14:24] Can you get your insurance company if you set it up through an advisor, can you get them to also pay the trauma cover through your Super? 

Phil: [00:14:31] No. 

Alec: [00:14:32] So that's just like a no no for super. 

Phil: [00:14:33] Yeah. Yeah. 

Alec: [00:14:34] What what what policy reason. Like it's not the policy. 

Phil: [00:14:37] It's it's, superannuation law.

Alec: [00:14:39] No, that's what I mean. Sorry. Like government policy raising it.

Phil: [00:14:42] Okay, here we go. Let's get out of here. Yeah, I like it. So the reason being, because superannuation is kind of an environment that the government doesn't want us to be able to easily pull money out of. 

Alec: [00:14:55] And so people are getting sick before. 

Phil: [00:14:57] Yeah. So you need to get money out of super. It needs to meet a condition of release. Yeah. And so a condition of release is death. Total and permanent disablement and temporary disablement. You can get income protection, but often those policies are a bit watered down. And the reason they're watered down is because it needs to, legally speaking, that a super fund cannot sell a contract that's paid through the super fund that doesn't meet the condition of release. So there are some really fun catches whereby if you're not, if you're not working at the time that you are injured or ill, you get to have the most amazing TBD policy and the most amazing income protection policy through your super. They just won't pay that. You won't get paid the claim. Because you've got to be gainfully employed to meet the condition of release. So that's why I sometimes, you know, adviser will talk about the policies inside super and not as good. And those things are so unlikely to happen but they can happen. 

Alec: [00:15:56] Yeah, but that's the point of insurance protecting you for unlikely catastrophic events. YWell, look at that incredibly wonky note. Let's take a break. And then on the other side, let's ask some more questions from the equity mates community about, I guess, the different types of super and how we should start thinking about it. 

Bryce: [00:16:16] Welcome back to Equity Mates Investing. We're here with Phil Thompson director of Skye wWealth for Ask an Advisor talking about all things insurance. Now Phil, before we get into the nitty gritty questions from the community. One thing that we often hear when we're talking about superannuation funds is to look at the fees and also what you're paying towards insurance and to switch off, you know, insurance if it isn't suitable for you. And I guess the question is at what stages of life should you be considering the different types of life insurances so that when we're making that decision in super, we're kind of clear on actually, I should be having this one on.

Phil: [00:16:54] Yeah. So my view is income protection. If you've got an income and you rely on that income, you should have income protection. Like I don't care how young you are, okay. If I'm injured I can go back to the parents. Like who wants to live back from their parents? I do that with my wife and my kids. It wasn't very fun. And so that's kind of a must have in my mind. If you have an income and you rely on it, disability, it's less likely to happen is very statistically really unlikely to happen, but it's catastrophic if it does happen again, if you rely on your income, it's important to have a TBD benefit. Life insurance is really the only insurance policy in my mind that we can kind of take it or leave it in certain life events, right. And I'm talking younger people when you get older and, you know, you're five years away from retirement, but you could retire today and you choose not to or income protection is not as important. But for young people, income protection and disability is super important. Life insurance, it's just a matter of going well, if I don't have anyone reliant on me or dependent on me. So I don't need a life insurance portion, maybe you could switch that off. But for young clients, it's so cheap anyway. And it's often paired with disability. So a lot of super funds won't let you switch off the life insurance and have what's called standalone disability cover. 

Alec: [00:18:13] So on that, on that point of no dependents, one question we got from the community was, no mortgage, no children. What is the minimum life insurance needed? And I guess you're saying zero. 

Phil: [00:18:24] Yeah. I mean, if you're dead, you know, you know, everyone's going to be crying and emotional if you pass away. Pragmatic and financially speaking, if you pass away and it's not going to have a negative financial impact outside of a funeral, then you don't really need life insurance. 

Alec: [00:18:44] Another question that we got that you might be able to tick off quickly. What are the benefits of having both income protection and permanent disability? I think implied in that question is that they overlap. 

Phil: [00:18:55] Yeah. So they do overlap a bit. Income protection won't fully replace your income. So it replaces a percentage of your income. So 70% of your pre-tax income is normal policy. So the idea of when you don't need it, can you live off 70% of your income if you're totally permanently disabled? If the answer is yes, okay. Maybe it's not that important. Our view at Skye is we like to replace your income because we want your kind of financial trajectory to be the same. Whether you're fully disabled or not. 

Alec: [00:19:29] Is insurance payout. Our insurance payout is taxed. 

Phil: [00:19:33] Yeah. 

Alec: [00:19:34] It's because, not.

Phil: [00:19:35] That is complicated, but income protection is taxable. Just like.

Alec: [00:19:38] Oh, okay. So I was going to say otherwise. If it wasn't taxable, then 70% makes sense.

Phil: [00:19:43] Yeah. You'd be the same. Yeah. So that makes a lot of people look at their monthly benefit on income protection. And they go well, that's more than what's hitting my bank account. So I'll be fine. But you got to basically run it through a tax. And to work out what's your post tax income protection. 

Bryce: [00:19:57] Can you over insure yourself so you get. Fully covered rather than 70% like I mean car insurance, house insurance. You can kind of plug in. Whatever number you want. 

Alec: [00:20:08] I want $1 million a year. And I'll just call it the premium. Yeah. 

Phil: [00:20:11] No answers, no income protection. You try it, it caps it. I mean the payment is based on your pre disability income. And so it's capped at 70% of your prey disability income. okay. So you and you can't, you basically gag in the system. You can't, I'm sure you can, you know, commit insurance fraud if you choose. That's okay then. But that's why TBD is important. So coming back to the original point, that's why we do like to have TBD because someone's always going to be worse off on income protection okay. And so maybe they just cover that 30% gap. Yeah. Because TBD can never go back to work. Yeah. 

Bryce: [00:20:48] And so with income insurance then is the only thing that goes into the looking at the premium. Just your payslip. As in like that. Just like your income. We're going to insure you up to 70%. 

Phil: [00:20:59] So you can insure like investment income. Investment income doesn't offset the income protection payment as well. So yeah, it's just you're assured your personal income.

Bryce: [00:21:08] That's it. And so there's no way we wouldn't pay a higher premium because we're self-employed. Right. Okay. So it's just. Yeah. Flat. 

Phil: [00:21:15] Yeah. Whether you're full time or you're self-employed, it doesn't have any impact on premiums. It has an impact on what they will cover. So being self-employed you've got profits in the business that you can cover. So, you know, whatever your salary is and there's profit in the business and assuming it's 50-50 ownership, you can cover that as well. Because if you weren't able to work there is an assumption that there would be a loss for that as well. So self-employed is a little bit more complicated than setting up the cover and a little bit more complicated in claiming on the cover, but that doesn't have an impact on premiums. 

Alec: [00:21:50] So we've got a couple more questions from the community. One that has come in. Can you have more than one income protection and life insurance policy? 

Phil: [00:22:00] Yeah. So life insurance is easy. You can have multiple. They will when you set up a new life insurance policy, they always want to know what else you've got. So if you're rolling in, you know, $1,000,000.10 times over, you won't be able to get the last five policies because the insurer will say, do you have any other life insurance? And you say you've got 5 million elsewhere? They'll say, well, we're not going to offer you that, that cover. Oh, so but but that's unlikely to have happened, having that much. But, you know, if you have two, $1 million policies, as long as they'll pay out. 

Alec: [00:22:30] And so you can do one in super one out of six. 

Phil: [00:22:32] Correct. Yeah, yeah. And we do that a lot in our work because we as much as we don't love the super policies, there is a lot of reasons why you should keep that for, for health reasons. Because there may be, you might have a health event that can't be insured. So we want to keep that default, you know, that 250 K or whatever. Let's keep that because it'll pay add on mental health or whatever the whatever the new policy will exclude. But income protection you'll you can if you have three policies at 70% of your income, they won't all pay out. So basically. 

Alec: [00:23:04] What if you have two. 

Phil: [00:23:06] Go do one will pay out and the other one will not. 

Alec: [00:23:07] . Okay I was wondering why you said three. Okay. 

Bryce: [00:23:11] Sorry. Why would you want multiple life insurance just so you get paid out more? 

Phil: [00:23:16] No, you don't need it. There's not. There's not really a requirement for it. You know.

Bryce: [00:23:19] I know it wouldn't in the. 

Phil: [00:23:20] Necessarily. I won't do it. We would we would sometimes get someone to keep their life insurance where it is and then set up a new one so that that could be a reasonable recommendation for us. But it but ideally you just want it all in one company. 

Alec: [00:23:37] So Phil, I think we've, covered the life insurance policies, to, to a pretty good degree. Let's see if I can remember them. Trauma, TBD, life and income. Well, dad, I'm learning. And, we're going to have you back on the show a couple of times throughout the year. So, if people do have more questions, they can ask in the Facebook discussion group or at equitymates.com/contact, and we'll put them to fill, otherwise you can book a session with Phil and get some personal advice about your insurance situation. You can go to equitymates.com/advice. 

Bryce: [00:24:13] Which I will be doing.

Alec: [00:24:14] Yeah I'm pretty interested to be honest. 

Bryce: [00:24:17] We'll talk about it in the next episode. 

Alec: [00:24:17] But I guess, there's this whole other bucket of insurance. And we did get some questions that related to general insurance. I've actually just moved house and don't have home and contents insurance, and I was hoping I was going to be able to ask you about that as well. But you can't give us advice on that.

Phil: [00:24:36] Yeah. So financial advisors, we can only advise on life insurance products. The general insurance products, It's under a different licensing arrangement. It's under general insurance there. Okay. Got a little bit more there on the two different sets of the legislation. One's a life insurance act. One's a general insurance act. So to set up a policy, you've got to go through an insurance broker. And under the law of insurance, you got to go through a financial advisor who can recommend those products. So you know, all professional indemnity, hymen contents, all of that stuff is a general insurance product. And if you will let me get a little bit more of a quote, the difference between them, those two bits of the act is a General Insurance Act can cancel the policy on you. So if you apply too much on your car insurance, the insurance provider can say, we're no longer offering you cover. And that's allowable under the General Insurance Act, under the Life Insurance Act. Once you have a policy, the life insurance provider can never cancel it on you because it's because that's a part of the act. Well, so that's why I like people to think about if I claim income protection, should I not? Because, my premiums will go up. They're not allowed to do that. They're not allowed to cancel your income protection after a claim because that's a part of that life insurance act. 

Alec: [00:25:51] Okay, that's good to know.

Bryce: [00:25:52] With the life insurance policies. Are there the waiting periods that you often get in general?

Phil: [00:25:58] So under some of the policies. So trauma has a similar qualifying period. So you need to wait three months before you can climb on cancer. So similar to a general insurance under and income protection there is a waiting period at claim time. But there's no qualifying period like general insurance. So if you as soon as you set it up, then you can claim on your income protection. You just need to wait for that general waiting period. But for life insurance, as soon as it is set up. Day one, you die. Day two, you'll get paid out.

Bryce: [00:26:30] Nice. 

Alec: [00:26:31] Nice. Probably so. Not worth dying for.

Bryce: [00:26:34] No no no. We are almost at the end. But I think my big takeaways here. Firstly,

Alec: [00:26:42] First of all, you're massive. 

Bryce: [00:26:43] Massively under-insured. Yeah. So to put more. Yeah, as we spoke offline, Ren and I have the same service set up for some reason. I don't know how it happened. I don't have any insurance through my super fund. 

Alec: [00:26:54] User error. 

Bryce: [00:26:55] No, I don't know, I don't know, it seems like something you don't. It doesn't seem like something I would do anyway. I also don't have the ability to click a button and they will go out and put on super. Before this conversation, I didn't have the ability to switch on insurance within the super fund, which also seems like a bit of a product. Anyway, they can figure that out. But it's good to know. I think my takeaway from this is that there are ways that I can keep it out of the cash flow that I currently have, but, do still do it through Super Fund, but probably in a more effective way and in a way that covers me better than the default that would come through the super fund. 

Phil: [00:27:34] Yeah. And and to to be perfectly blunt, we every time we replace a policy like I look at that advice, and most of the time the policies through the super fund are more expensive than the same underlying insurance provider going through an advisor. And, and I can go really deep into that and why that's the case. But, like, you know, one of the reasons is, you know, there is becoming a trend with super funds to keep the tax deduction that the members should be getting access to. So insurance within super you know, the tax rate within superannuation is 15%. So your insurance premiums $1,000 premiums. The member should get $150 tax back. There's a big trend at the moment, with some of the biggest super funds that are going actually 150 bucks. 

Bryce: [00:28:23] Looking pretty good. 

Phil: [00:28:24] I'll keep it. Thank you very much. 

Alec: [00:28:25] You're more you're more than welcome to name and shame. [00:28:26][1.5]

Phil: [00:28:27] I mean we've got legal super just made the change. Rest super does it. They say it's to it's to make the future premiums cheaper and it's to administer the insurance premiums which 15% of all premiums, I think I calculated I looked at their profit and loss because I, I geek out about this stuff and it's something like $300 million or something ridiculous that they're maybe, maybe that's a bit too much, maybe like an insane amount of money that they just decided, hey, we okay? Imagine you imagine your boss saying, hey, you've done your personal tax return, you got $1,000 back. I'll keep that because I pay, I pay you. It's insane. But that's what that's what some super funds are doing. They're withholding it. 

Bryce: [00:29:10] How do we. How does someone find out that with that super. 

Phil: [00:29:12] It is incredibly difficult to find out because they won't they disclose it in their PDS. Like I mean like Australian super. They don't keep it. But if you're not contributing to your super fund and therefore not paying tax, then they will offset the tax that you're paying by the, by the, by the refund of that. So if you're not contributing but you're still paying that thousand dollar premium, then they won't give you the 150 back. Australian super it is I've I went deep into PDSs and there's 120 page super PDS is that are not very fun to try and work it out. And for me I know what I'm looking at. Very difficult to find this. 

Alec: [00:29:48] So the answer to your question is they speak to Phil? Yeah, yeah. So just on that. So let's say I'm with Rest and we're just picking out because no Phil. But if, if, if we then went to you and set up insurance that was paid through our rest super. Could you have exactly the same insurance set up? But the only change is I actually want my tax back to me. 

Phil: [00:30:16] Yes. And it's not always going to be cheaper. 95% of the time it will be. But, it's not always going to be cheap, but there are situations where it's not for whatever reason, the default covers normally really cheap. That's the good thing about super. That default cover is insurance companies. I tend to for that and they make that dirt cheap. But the reason they do it is because when they increase it, that's not tended. That's just a direct relationship between the insurer and the member. So that's when the insurance providers make their money back. And we've done a lot of research again on the, on, the base cost. And then when you increase it the percentage increase is significant. So you can do that. We can set it up so your Rest or whatever superfan you are pays the premiums. And if we tell anyone to cancel their Rest cover, which is pretty rare because we do, there are lots of reasons why we keep it the default cover. We'll always make a comparison and show everyone what the cost would be. if we increased it with rest, it would cost this much if we went with the provider that we're recommending for these kind of features. This is what it would cost you. And that's what I look at every day. Every day, every day I look at it, I literally just look at that title and go, is it more expensive? Yes, it is more expensive to keep because that's I mean, yeah, from a business that's the biggest risk is replacing something that's more expensive. Even if it's a better quality.

Bryce: [00:31:39] Now I want one more for me. And I think then Ren has a final bit, just talks through the relationship between you and your client because in, you know, in terms of financial advice, often there's a bit of an ongoing relationship working towards goals and those sorts of things. But when I come and see you, is it just sort of a one off? You really help tailor what's right for me? And then what is the relationship like? 

Phil: [00:32:01] Yeah. So our processes start off with a 15 minute phone call because we want to make sure that people only want insurance advice. We don't give holistic advice. We won't recommend asset allocation in super. We just want to make sure that people are understanding that we're only going to provide, insurance only advice. And so we'll go through the process. And so there's an initial phone call. And then we get people to fill out a massive online form. And the main thing we focus on is health questions, because that's where we tailor the insurance recommendation to the client, because that has actually has the biggest impact on which insurer we recommend is someone's health history. And so we'll ask heaps of questions. Then we go and basically we talk to the insurers and say, hey, here's a health history. We de-identify it and and they give us an indication of what the terms would be in terms of exclusions and loadings. And we can talk about that on a future episode. And then we'll put forward an insurance proposal where we basically say this is the expected exclusions and loadings on the policy. This is the level of cover that we recommend based on your financial position, and this is the cost of that cover. And then from there, people can go, awesome, thank you for that. And we charge a fee for that service. And that's $330 for individuals and 495 for couples. And they can take that away and, and, and do, you know, go and implement, increase their own own policies, somewhere else or we can help them through that process. So if they do decide to engage with the application, process them. Well, our team kind of manage that process. And then we get paid a commission from the insurance provider through that application process. And then ongoing there's ongoing reviews. You know, it's it is we try and treat our clients like adults, like when your life changes, get back in touch. You got a mortgage, you're getting a mortgage, you're having kids. All of these things we want to know about. We'll tell you if we don't need to change it in ink because it's fairly straightforward. We may have set it up to kind of future proofing those things or whatever the case may be, and then we'll just review it and update the policies, on an ongoing basis with the clients. 

Bryce: [00:34:03] Awesome. 

Alec: [00:34:03] So, Phil, Bryce alluded that I had a final question. 

Phil: [00:34:08] He put you in there.

Alec: [00:34:08] It's a curly one. How many insurance policies do you have? 

Phil: [00:34:13] Well, I've got all of them. 

Alec: [00:34:15] Just just the4. Well. 

Phil: [00:34:16] I've got childs cover as well. So we didn't talk about that. It's for my kids. If they have cancer or they pass away, we get a lump sum. Okay. All right. So that's the policy that we look at for people with kids. I've got all of my covers and am going through the process of increasing my cover at the moment. So technically that would be two separate policies on the statement, but it's with the same insurer. 

Alec: [00:34:39] Yeah. Okay. There you go. Fully insured. Yeah. Through super or not through super.

Phil: [00:34:47] So life and TBD is sort of a super income projection. I actually just moved it out on a super for the tax deduction and trauma I've got. Yeah that's on. 

Alec: [00:34:57] Okay. Nice. 

Bryce: [00:34:58] Epic. Well if you're like me and I'm sure ARIN as well like we'll probably both be in touch. Phil to sort out our own insurances especially desperately under insured. Oh my goodness. You can head to equity mates.com/advice. And there's a form that if you just tick Phil's name, we'll make sure that we connect you, straight through to Phil and his team. And you'll be able to go through the process with him if, if you have any insurance questions or even just want to review what's in your superannuation, it feels like it's definitely worthwhile. So, Phil, thank you so much for making the trip up to Sydney to do this. We really appreciate it. 

Phil: [00:35:33] No worries. Thanks, guys. And if you do reach out, we've got a big team, so, you may not get it. That's one thing we do get asked. Oh, can I speak to Phil? And it's like, I'm fine up to Sydney. 

Bryce: [00:35:45] Sure. If you want to speak to Phil or any of the employee advisors at Skye Wealth, then head to equitymates.com.

Alec: [00:35:50] Scomo advice. Yeah. Link will be in the show notes. But, Phil. Thanks for following up and joining us today. 

Phil: [00:35:55] Awesome. Thanks guys.