Approach Life Insurance and Real Estate with the Same Lens

On the surface, life insurance and real estate appear to have little in common as investments. However, if you think about them more deeply, they share some important characteristics.

For example, they can provide you with financial security and tax-free benefits. In general, you should also take out both products relatively early in your adult life. In addition, you should research both real estate and life insurance products carefully before you buy.

Financial security

For most of us, our home is our most valuable financial asset. Paying off a mortgage is a large, long-term financial commitment and it provides security for ourselves and our loved ones.

Taking out life insurance cover also provides us with security. It can help to ensure our loved ones won’t be left with home loan repayments that they may not be able to afford if we pass away or become totally and permanently disabled and are no longer able to work.

It’s important to think of life insurance as an investment, just like any other type of investment. It helps you to protect the wealth you’ve built, which is just as important as building that wealth. You should insure your life, just like you would insure your home and its contents from damage or theft. Both forms of insurance are sensible strategies to provide you with peace of mind and financial security.

Tax-free benefits

Both real estate and life insurance can also provide us with tax-free benefits. Owner-occupied homes in Australia are exempt from capital gains tax (CGT) when they are sold at a profit. Australian property prices have a long-term record of growth, even if there are temporary periods when market prices stagnate or decline.

The proceeds from life or total and permanent disablement insurance policies may also be tax-free, provided they are paid to you or your beneficiaries.

When should you buy?

In general, the earlier in life that you buy both real estate and life insurance, the better. That’s because you’ll give yourself more time to achieve capital growth on your property, and you’ll also find that life insurance premiums are cheaper when you’re younger. If you delay taking out a life insurance policy until you’re older, your premiums will be more expensive due to a higher risk of death as you age. Your policy may also be subject to loadings and exclusions due to pre-existing medical conditions.

You’re also more likely to need life insurance when you’re younger and you have higher levels of debt. For example, a mortgage on your home.

The importance of researching the market before you buy

You shouldn’t rush into buying a home and taking out a mortgage, and it’s the same with a life insurance policy. For example, when you’re buying a home, you need to thoroughly research:

  • comparable properties on the market that have all the features that you need or want. Doing this can help you to select the best property that is available.
  • the terms and conditions of different home loan products on the market. For example, the interest rate and any fees that you might be charged. Even a small difference in home loan interest rates can make a BIG difference to the amount you’ll need to repay over the term of your loan.

When you buy life insurance, you also need to thoroughly research:

  • the different products on offer from different life insurance providers so that you can find the best one to suit your needs.
  • the terms and conditions of the policy, so you fully understand the coverage that you’re buying. For example, your policy may contain benefit payment exclusions. All terms and conditions will be contained in the product disclosure statement (PDS). Life insurance providers in Australia are legally required to provide you with a product disclosure statement before you take out a policy.

How we can help

At Qi Wealth, our experienced, expert team of life insurance specialists can help you to protect your financial assets. Our home loan team can also help you to find the best loan for your needs if you’re thinking of investing in real estate. We’ll take the time to understand your individual circumstances so that we can provide you with the best possible advice.  We develop long-term, trusted relationships with our clients.

Contact us today to find out how we can help you!