Flexibility

The Strategy works on the assumption that most Business Proprietors have multiple Insurance Needs that they normally deal with on separate Insurance Policies.

Each of these Needs can change over time, which would normally require a change of Policy.

However, if the Insurance Cover can be aggregated onto One Policy, it can form an Insurance Facility or Pool that can be re-purposed over time.

This Strategy does not require a Proprietor to obtain any Cover other than what they would otherwise have required.

It simply takes advantage of the total Sum Insured that would otherwise have been spread over multiple Policies.

The Proprietors of a Business can re-purpose the Cover according to the relative priority of their Needs.

Decreasing Needs

Over the lifetime or career of a Business Proprietor, it can be expected that some Needs will decrease.

In the Business context, it would be hoped that Debt is being repaid (even if it might only be an interest only facility at the outset).

In the Personal context, your Personal Need should decrease as:

you repay your Home Loan;
you educate your Children;
your Children become financially independent;
you build personal wealth through superannuation and other investments; and
you need to fund less years of living expenses.

Normally, if the Debt Reduction and Personal Cover was held on separate Policies, it would be appropriate to reduce this Cover.

Increasing Needs

In contrast, some Needs can be expected to increase over the lifetime or career of a Proprietor.

In the case of a Business, it is hoped that the value of the tangible assets and goodwill will increase over time.

In the case of a Business or Property, its net value will increase as the Debt is repaid.

Thus, you might need to increase your Buy/Sell Cover.

Re-Purposing Your Cover

Instead of obtaining additional Buy/Sell Cover when the need arises, the Debt Reduction or Personal Cover that might otherwise have been reduced can be re-purposed as Buy/Sell Cover.

Click here to see a typical change in the needs of a Proprietor.

The ownership of the Policies can affect how the Cover is re-purposed.

“Multiple Policy Approach”

Traditionally, Advisers have written one Policy for each separate need, often resulting in four or five different Policies for each person, often in the name of different owners (the traditional " Multiple Policy Approach").

If the cover was written on separate Policies:

as the Debt reduces, the Debt Reduction Cover should be reduced, to avoid any risk that it might be treated as Key Person Revenue Cover (and taxed upon the payment of a claim);
as the Purchase Price increases, the Buy/Sell Cover should be increased; and
as Personal Needs reduce, the Personal Cover should be reduced.

Administrative Requirements

These steps involve the administrative burden of dealings with the Insurance Company.

In addition, the increase might require new underwriting and medical tests, which can take up valuable management time.

If the Life Insured cannot satisfy the Insurer’s requirements, an increase might not even be possible.

“One Policy Strategy”

In contrast, the One Policy Strategy is designed to place all of the cover under the one roof.

Once it is under the roof, you might find that you have the right total Sum Insured for the indefinite future.

All that needs to be changed is the allocation or "mix" or "colour" of the cover.

Administrative Requirements

It is not necessary to deal with the Insurance Company or do medical tests in the future, unless additional cover is required over and above the original total Sum Insured.

Thus, changes become a management issue, not an Insurance Company issue.

Rather than changing your Policies, the One Page, One Policy Strategy simply requires a change of the Schedules to your Business Insurance Trust Agreement.

Change of Beneficial Ownership of Cover

Similarly, the beneficial ownership of some Personal Cover might be moved from the Super Fund to the Life Insured as the value of the Super Fund starts to exceed the Reasonable Benefits Limits (this might not be relevant after 1 July, 2007).

Dual Role of Personal Cover

Click here to see how your Personal Cover can create a "warehouse" or "comfort zone" for future growth of the Sale Price of your Equity in the Business.

Dual Role of Debt Reduction Cover

Click here to see how your Debt Reduction Cover can create a "warehouse" or "comfort zone" for future growth of the Sale Price of your Equity in the Business.

Adviser Tip

Your Purchase Price and your Personal Cover both contribute to the "pot" you have created to fund the total capital requirements of your family.

As your Purchase Price increases over time, your Personal Cover can come down.

If they are both on the One Policy, all you have to do is "change the mix".

See more Adviser Tips

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