Here’s another major financial matter that you need to tackle when you have more or less settled in Australia – INSURANCE.
You would already have insurance policies in Singapore and now, you need to think about whether to discontinue them, purchase new insurance policies in Australia or bite the bullet and maintain insurance cover both in Australia and Singapore.
Compulsory Insurance in Singapore
So long as you remain a Singapore citizen, the following insurance covers are mandatory, which is not a big issue if you have sufficient funds in your Medisave or Singapore bank account to cover the premiums:
Compulsory Insurance in Australia
Medical/health insurance is not compulsory in Australia. With the safety net of Medicare, it is not necessary to have medical/health insurance, unlike Singapore. However, if your income is above the threshold, you will have to pay the Medicare Levy Surcharge via the tax system.
If your income is not above the threshold in the initial period of moving to Australia but you are over the age of 31 or close to it, you may still wish to consider getting private health insurance so that you can avoid incurring the Lifetime Health Cover (LHC) loading.
If you are a new migrant to Australia aged over 31, then you normally have 12 months from the date of your Medicare registration for interim or full Medicare benefits (usually a blue or green Medicare card) to purchase hospital cover without a LHC loading.
It is also worth noting that there is a rebate on the premiums paid for Private Health Insurance. This rebate is income tested which means your eligibility to receive it depends on your income for surcharge purposes. If you have a higher income, your rebate entitlement may be reduced, or you may not be entitled to any rebate at all. If you have under-estimated your income with your insurer and have receive a higher rebate than you are entitled to, you will have to repay the rebate via the tax system when you lodge your tax return.
2 Main Differences in Insurance Covers in Australia & Singapore
Obviously, insurance covers differ from country to country, not just Australia and Singapore. However, based on our own experiences, we would like to point out 2 major differences for your consideration.
- Whole of life insurance policy: This is common in Singapore where a portion of insurance premiums contribute to the surrender cash value of the policy over a period of time. Eventually, the surrender value of the policy exceeds the total premiums paid due to investment returns. Such insurance policies are no longer sold in Australia. So what you will find is that all insurance covers in Australia are term policies with no investment returns.
- Level premiums vs stepped premiums: Level premiums and stepped premiums are common to both countries. Most policies in Singapore are sold based on level premiums which never increase, so if you purchased your policy when you were fairly young, you enjoy low cost premiums for the duration of the cover. In Australia, level premiums may still increase due to CPI. Level premiums tend to be hefty, so it is common to purchase policies based on stepped premiums but this could mean very high premiums as you grow older.
Common Insurance Covers in Australia
Life Cover: This pays a lump sum to your beneficiaries when you pass away.
Total & Permanent Disability Insurance (TPD): This pays a lump sum to help with rehabilitation and living costs when you become have a total & permanent disability due to illness or accident.
Trauma Insurance: This pays a lump sum if you’re diagnosed with a major illness eg. cancer.
Income Protection Insurance: This pays some of your income if you can’t work due to illness or injury.
Further information on each of the above is available on the Government’s Money Smart website.
Income Protection Insurance
You would probably be familiar with the first 3 (life, TPD and trauma/critical illness cover). However, income protection insurance may be new to you as it is not commonly available in Singapore. So it’s worthwhile researching more into this type of cover and getting full understand of the following aspects relating to income protection insurance:
- Indemnity value policy vs agreed value policy (our recommendation is to go with agreed value if you can afford the higher premiums)
- Waiting period (30 days would be nice but the premiums would be high and you’ll probably have paid annual & sick leave to tide you through until the waiting period ends)
- Benefit period (choose the longest possible period if you can afford the higher premiums)
- Level or stepped premiums (go with the option that fits in with your budget and age)
- Increasing claim option (choose this if it is available with your insurer. In the event that you are unable to work due to illness or disability for several years, this ensures that the monthly payout keeps pace with CPI.)
Generally insurance premiums are not tax deductible in Australia, except for the following:
- Landlord insurance (building, contents and public liability) for rental property
- Income protection insurance outside of super
However, any insurance you purchase within your super is tax deductible for your super.
Disclaimer: This basic article on insurance was written by ‘Life in Melbourne’ in consultation with a registered tax agent. We suggest that you seek the advice & services of an insurance agent and a tax agent instead of relying solely on any material you may find online, including this article.