Clarity
(OnePath)

Know the difference between stepped and level premiums

Life insurance premiums are predominantly based on the risk of certain events happening to you. Because health risks increase with age, life insurance premiums will generally increase over time.

That’s why most insurers offer two common ways of paying for, and managing, the costs of your cover over time:

1. Stepped premiums: when the cost of your cover is recalculated each year based on your age at your policy anniversary. Generally this means your premium will increase each year as you get older.
2. Level premiums: where premiums are calculated based on your age when any cover started. Your premium is generally averaged out over a number of years, which means you avoid increases in your premium due to age at each policy anniversary. This means your cover is more expensive than ‘stepped premiums’ at the beginning of your policy, but generally gets cheaper (relative to stepped premiums) as your policy continues.

Regardless of whether your policy is on stepped or level premium, premium rates and premium factors are not guaranteed or fixed and many life insurers in Australia have repriced premium rates in the past.

Stepped or level premiums – which is right for you?

Generally, this depends on how long you’re planning on keeping your insurance. If you’re planning on keeping your policy for longer than 10-12 years, level premiums may save you money over the life of your policy.

‍You may also be able to use a combination of stepped and level premiums.

For example, if you think you might want to reduce your level of cover down the track (e.g. when you’re kids are grown up or you’ve paid down debt),you may be able to use level premiums for the portion of cover you think you’ll keep longer and stepped premiums for the additional cover.

This is something your financial adviser can help you with.

Repricing is a possibility regardless of which structure you choose

It’s important to note that at policy anniversary the premium may still increase (even with level premiums), because age is just one factor that determines your premium. Other factors that impact premium (such as claims trends in Australian population) can result in a repricing of your insurance cover.

When insurers reprice stepped or level premiums, they don’t do it for an individual policy within a specific group unless they do it for every policy in that group.

To decide whether you’re better off on stepped or level premiums going forward, we recommend you speak to your financial adviser. They can help you understand your policy as well as any repricing activity that’s recently occurred, so you can make an informed decision.

A graphical example

Below is an illustration of stepped v level premiums, showing the difference between the two when you look at increases due to age. Other types of premium increases aren’t shown on this graph.

For illustrative purposes only. This graph illustrates age-based premium increases for stepped against level for all covers. This premium comparison has been calculated, assuming all other factors affecting the premiums are excluded.

Both stepped and level premiums can increase due to factors other than age.

Premium rates and premium factors are not guaranteed or fixed, and insurers have increased premium rates in the past and may increase in the future.

We recommend that you refer to the relevant product disclosure statement and policy documentation, and speak to your financial adviser, to understand other factors affecting your premiums.

Well Covered
(Steadfast)

Cyber insurance has recently become a highly discussed topic. Cybercrime is on the rise, with criminals becoming increasingly audacious in their attacks.

For instance, the world recently watched on in horror as a large part of the US population was unable to access fuel as hackers infiltrated a utility company’s IT system and shut it down.

Even more recently, in Australia hackers brought down the back end of the Nine Network, which owns major TV and radio stations and newspapers, disrupting broadcasts.

Gerry Power is the head of sales of specialist cyber insurance provider Emergence Insurance. He says large attacks like these mean small businesses can longer ignore cyber threats.

“Every time I pick up a newspaper, somebody’s talking about ransomware or cyberattacks. Smaller businesses can’t say they don’t understand the threat.” He says at the moment the top cyber exposures are business email compromise, ransomware and human error.

In response to the heightened threat, governments have become much more active in stamping out cybercrime, Power explains. “Governments and regulators are acting to control ransomware. In Australia, the federal government is ramping up efforts and regulation to protect personal data. There’s also a push to make it mandatory for companies to disclose if they have paid money in a ransomware attack. So there is massive amounts happening behind the scenes.”

“Cyber insurance also provides cover for the cost of any litigation from affected parties ”

How to reduce cyber risks

When it comes to developing a robust approach to cyber security in small business, start by trying to understand your security controls and security posture.

“The challenge in this space for smaller businesses is they’re so focused on trying to keep the business afloat during what has been a very difficult 12 months, they haven’t addressed their cyber risks in the way they should,” says Power.

To address this, the first thing businesses need to do is ensure they are backing up data properly. “One of the ways that we can avoid paying a ransom is if a business has meticulously backed up their data every single day. That means if there is an attack, we can wipe the system and build it back up from back-ups so we don’t have to pay a ransom,” he adds.

It’s not enough just to have backed up the data, it also needs to be recoverable. Says Power: “Sometimes we find when we go to retrieve the data, it’s faulty or compromised. So test back-ups work before an attack happens to give yourself peace of mind your data is recoverable.”

Automatic updates of the system’s anti-virus software are also a must.

Cyber help for small business

It can be hard for businesses focusing on their day-to-day operations to know how to identify the right sort of cyber health.

“Many smaller businesses put blind faith in their managed IT services provider or consultant. But it’s also essential to invest an appropriate amount in your systems and controls. Your IT expert should be abler to guide you here,” says Power.

Cyber insurance also plays a key role. This cover provides protection for businesses and allows them to transfer losses arising from a cyberattack to the insurer. Power explains there are three main cyber risks SMEs can manage through insurance.

“The first one we call first party costs, such as IT forensics, remediation and public relations and marketing costs to communicate to affected people. If there is a loss of data, there may also be an obligation to report this to the Office of the Australian Information Commissioner or the Privacy Commissioner, which also has a cost attached. These costs are borne by the business if there is no insurance policy in place.”

Cyber insurance also provides cover for the cost of any litigation from affected parties and loss of profits if your business experiences a cyber breach.

But it’s important to realise insurance is just one part of the cyber puzzle. Taking a proactive approach to your business’s cyber health is crucial. Staff training and the right IT support and infrastructure can play a critical role in reducing the risk of an attack.

With threats only increasing, now’s the time to take a look at your cyber protocols to ensure if there is an attack, you’re as prepared as possible. Speaking to an insurance broker is a good place to start. They will be able to assist you in identifying cyber related risks and selecting cover that is suitable for your circumstances.

This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.

Information is current as at the date the article is written as specified within it but is subject to change. Steadfast Group Ltd and Steadfast Network Brokers make no representation as to the accuracy or completeness of the information. Various third parties have contributed to the production of this content.

Money and Life
(Financial Planning Association of Australia)

How healthy are your finances? Isn't it time you put your own financial wellbeing front and centre? You can take control of your financial future quickly and easily, with a simple financial health check.

Just like your physical health, it's worth giving your finances a check-up once in a while. Over time, unhealthy spending habits can creep in, threatening to derail your progress. Here's how to give your finances a health check and find out where you can make some healthy gains.

Step 1: Take your financial pulse

Understanding where you stand with your finances is the first and most important step. It's also the one many people struggle with! Taking a close look at your financial situation can be uncomfortable, but it's a lot easier than you might think, and, essential, if you want to achieve your goals.

Here's how to analyse your spending and put a budget in place:

• Use a spreadsheet or online budgeting tool to record all of your essential and non-essential expenses.
• Fill out each category using figures collected from your invoices and bills. Using real figures will give you a more accurate idea of your spending.
• Check how your expenses add up against your income. Are you overspending? Look for areas where you can cut back. Underspending? Great, you'll have some wiggle room to put towards your financial goals.

Read more: Top negotiating tips to cut your bills now

Step 2: Get the basics working for you

Once you've got your spending into shape, take a look at these financial fundamentals. Do you need to work off any debt or gain some healthy savings?

• Debt - Like carrying a few extra kilos, debt can creep up and become a burden before you know it. Put a repayment plan in place and stick to it. Be specific about the amounts and timeframes. Check out these smart strategies for paying down debt.
• Emergency fund - Like health insurance for your finances, an emergency fund gives you a buffer against the unexpected. Aim to build up enough funds in a separate account to cover six months' worth of living expenses.
• Superannuation If you want to stay financially fit and healthy into old age, you need to lay the groundwork now. You can use the Moneysmart retirement planner to work out how much super you'll have when you retire. If you need to top up your super, you can do so by salary sacrificing or making after-tax payments to your super. Find out how to do a superannuation health check.
• Insurance It's important to protect your earning ability and assets in case of the unexpected. Make sure you have enough total and permanent disability, income protection and life insurance cover to protect you and your family.

Read more: Why financial wellbeing is a pillar of good health

Step 3: Set yourself some healthy goals

Once your finances are on the path to good health, you can set yourself some bigger goals. This is the fun part, where you get to dream about all the things you'd like to do, have or experience.

Your financial goals could range from the more practical, like buying a house, setting up an investment portfolio or paying off debt, to the enjoyable, like taking a holiday or moving to the beach. Whatever it is you want to do, this is your opportunity to envision it.

Try brainstorming as many goals as you can. Write down each one of your ideas on a post-it note. Give yourself a set amount of time to generate a stack of ideas, then prioritise them using the post-it notes. Select the top two or three to work towards and use them to motivate you.

Related: Shut out the noise for better financial choices

Step 4: Put your financial fitness plan in place

The best goals are ones that are supported by a plan. Now that you've detoxed your finances and identified your goals, you need to work out how to get there. Depending on your goals and your timeframe, saving alone may not be enough. You might need to consider other ways, like investing, to grow your income. This is where a financial planning professional can help. A financial expert can advise you on strategies to achieve your financial goals.

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

The Reserve Bank of Australia has warned the unemployment rate is expected to increase in the near term due to the lockdowns in parts of the country which will see the economy contract in the September quarter.

This is largely the result of the lengthy virus lockdown in Greater Sydney and regional NSW areas.

Last month's lockdowns in Victoria and South Australia will have also left a negative mark, as will the current restrictions in Queensland.

"The economic outlook for the coming months is uncertain and depends upon the evolution of the health situation and the containment measures," RBA governor Philip Lowe said in a statement.

"Beyond that, the bank's central scenario is for the economy to grow by a little over four per cent over 2022."

Dr Lowe also expects the jobless rate will resume its downward trend, reaching 4.25 per cent at the end of 2022 and four per cent a year later.

The unemployment rate fell to a decade low of 4.9 per cent in June.

The central bank left its key interest rate policies unchanged at Tuesday's monthly board meeting, including the cash rate at a record low 0.10 per cent.

Dr Lowe reiterated that in an environment of rising housing prices and low interest rates, the bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.

The central bank may draw some comfort that demand for home loans and applications to build homes are falling.

New Australian Bureau of Statistics data shows the value of new home loans fell 1.6 per cent in June to $32.1 billion. For owner-occupiers, loans fell by 2.5 per cent to $22.9 billion.

"While this was the largest fall since May 2020, owner-occupier commitments remained 76 per cent higher compared to a year ago and 64 per cent higher than pre-COVID levels in February 2020," ABS head of finance and wealth Katherine Keenan said.

The number of home building approvals also fell 6.7 per cent to 18,911 in June, including an 11.8 per cent tumble in private sector houses to 12,037.

This was the third consecutive monthly decline reflecting the unwinding of pandemic stimulus measures, such as HomeBuilder, the ABS said.

Unsurprisingly, confidence among Sydneysiders fell sharply in the past week following the extension of the NSW virus lockdown to the end of this month.

However, Australians have got a spring back in their step in other parts of the country after restrictions were eased in Victoria and South Australia.

Overall, the weekly ANZ-Roy Morgan consumer confidence index a pointer to future household spending rose 1.1 per cent after two weeks of hefty falls.

Confidence slumped by seven per cent in Sydney, but was partly offset by a two per cent rise in Victoria and a 2.9 per cent increase in South Australia.

Sentiment in Brisbane was also up 2.7 per cent, but the majority of the survey was completed before the three-day lockdown in southeast Queensland was announced, ANZ head of Australian Economics David Plank noted.