Prioritising your insurance portfolio from a life and health perspective
By Danny Newman, Branch Manager – Beit Shemesh, Goldfus Insurance
With so many different types of insurances plans on the market, it is becoming increasingly harder to know which ones, one ought to consider. That is why it is important to understand the value of each type of policy, in order to make informed decisions that are specific to your personal needs.
With the end of the financial year upon us, here are some tips that could enhance not only your insurance portfolio, but also maximize tax benefits.
Atzmaim (self employed ) – As the tax year comes to an end, it is important to optimise any deposits in your various pension funds before the end of year deadlines. Atzmaim are able to deposit up to 16% of their annual salary into their pension funds and up to 7 % of their annual salary into their Keren Hishtalmut, up to the cap for 2014. Since some of the money deposited into the various pension policies can be written off as a tax deductible expense, it is highly advisable to speak to your accountant and then your insurance agent, in order to determine the optimal amounts, well before the year end.
Life insurance – The end of the year can often be the optimal time to purchase life insurance, as some of the insurance companies often offer significant end of year discounts. Currently, in Israel, only term insurance plans for a pre-determined length of time exist. Whole of life plans have not existed here for many years. Within the term insurance plans available, different insurance companies may offer different types of plans with regards to sums insured (lump sum vs monthly stipend), maximum age, length of policy, monthly premiums and the option of the premiums rising every year, 5 years, 10 years etc. For those with young families or other dependents, life insurance should be placed high when prioritizing one’s insurance portfolio. Life insurance premiums can also be used as a tax deductible expense.
Health insurance – Whilst the public health insurance system in Israel is very good, there are three main elements which are not adequately covered, either partially or not at all: Medicines not included in the Government health basket; comprehensive transplant cover; and comprehensive cover for private operations in Israel & abroad. Private health insurance policies are available to fill the gaps where the public health system falls short. With expected changes to the public health system potentially coming into effect within the next few months (should the German Committee recommendations be implemented), be sure to explore your options as soon as possible. Should the reforms take effect, the more comprehensive private health insurance policies as we know them today, will no longer be available to new applicants.
Investments – With the new tax agreement between Israel and the USA, new regulations for US citizens are now in force, with banks and investment houses requesting a declaration of US citizenship and/or residency. The IRS are now requiring all expats to declare their assets abroad, which may be subject to tax. Despite this, with better performances than banks, it may be worth consulting with your accountant to determine whether or not opening an investment/savings plan through investment houses or insurance companies, is beneficial under the new regulations.
For those non-USA citizens who are not beholden to FATCA and other such regulations, one ought to explore alternative options through investment houses and insurance companies, as the earning potential is far greater than the basic savings plans currently offered by the banks.
Disability income – One is able to take out a policy to cover up to 75% of one’s declared income. There is no point in insuring more than 75% as in the unforeseen event that one is unable to work as a result of a disability, the insurance companies will combine and pay a maximum of 75% irrespective of whether one insured for more. It is common to have disability cover through social benefits set up by the employer, so an employee should check their social benefits prior to purchasing a disability income plan.
Self employed individuals can use premiums for disability cover as a tax deductible expense.
There are other compensation based disability income products on the market which are worth considering for those with an income greater than they are declaring or for those covering less than their full income.
Long Term Care (Siudi) Insurance – With the advancement of modern medicine, people are now living longer than ever before. The longer we live the greater the likelihood of becoming a long-term care recipient. Long-term care can prove costly. Insurance companies offer different variations of Siudi policies to cater for one’s needs. With fixed premiums for the lifespan of the policy, premiums are cheaper the younger one enters the plan.
It is possible to purchase cheaper collective policies through the kupat cholim, however they are limited in terms of sums insured, length of cover and may exclude certain scenarios.
Personal Accident – There are many advertisements offering personal accident insurance for as little as NIS 1 per day and the initial thought process is, “yes, I could afford that”. However this policy may not necessarily be the highest priority for everyone. This type of policy may be more pertinent to those who work in manual labour, where a broken leg or arm can incapacitate a person and seriously affect their ability to work. For self-employed individuals in the service industry, purchasing a policy of this kind can guarantee some form of income during the recovery period.
Your insurance portfolio is a valuable asset which should be tailored to your specific needs. Speak to your agent to determine which policies should be a priority and which are considered a “luxury” at this stage in your life.
For more information about insurance options in Israel, contact us today!