NEWS

Your Money & You

November 2012

Mobile and tablet insurance

by Greg Medcraft, ASIC Chairman

Got a smartphone or tablet?  These devices cost a lot of money and can be easy to damage or lose.   It’s easy to get caught up in the hype and rush out to buy the latest device – but don’t forget to think about whether you need insurance.

There are two ways you can insure your portable electronic devices: you can add to your contents insurance or get separate portable cover.

If you already have contents insurance for your home it can be cost-effective to add your phone, tablet or laptop to your existing insurance.  It will cost extra but if you need to claim it usually won’t affect your no-claim discount.  Cover provided through contents insurance policies is also more likely to cover accidental loss of your device.

You can also buy insurance specifically for portable devices.  Separate portable insurance can work well if you have no existing contents insurance.  But be aware that some insurers won’t allow you to start a policy if your electronic device is not brand new.

Check what’s covered
Not all policies cover the same things. Check that the policy you are considering covers:

  • replacement if the device is stolen
  • reimbursement of unauthorised calls
  • worldwide travel
  • damage
  • mechanical failure
  • accidental loss.

Most policies don’t cover devices stolen in an unlocked vehicle or left unattended in a public place; nor do they cover general wear and tear.  It is also important to know that most policies don’t give you a new device if the one you’ve lost is a few years old. Most only cover you for the current value of your device.

Making a claim
If your portable device has been stolen you’ll usually have to notify the police within 48 hours and your insurance provider within 14 days. Proof of purchase such as a receipt should be enough to prove you own the device.

Remember if someone steals your phone, laptop or tablet, they can get more information from it than they can from your wallet. So keep your devices safe and be careful with your passwords.

If your device is stolen you should immediately disable SIM or internet cards. Ask your phone provider to clear your personal phone data if you have anti-virus software.  You can locate your phone via GPS if you have this facility on the phone.

Is it worth insuring your mobile devices?
Think about what it would cost if you had to replace your tablet or smart phone. If you’re happy you can cover the full cost you may decide insurance isn’t needed – but if you have an expensive device and travel often you may decide to get cover because there is a reasonable chance of something going wrong.

Whatever your decision, make sure you know all the facts about what is included and excluded in your policy.

For more information, go to www.moneysmart.gov.au or send your article suggestions to ADFcolumn@asic.gov.au.

Tips for generating Inflation-linked Income

In a previous newsletter article , we explained why inflation can be a major problem for retirees. 

Depending on your circumstances, this problem may be reduced by having a medium/long term plan in place to inflation-link your retirement income. Of course, many longer serving former military members are fortunate enough to receive a guaranteed lifetime indexed pension in retirement (although strong views have been expressed about the adequacy of the indexation).

Nevertheless, dealing with inflation (especially in retirement) is a challenge for all of us, whatever our personal financial circumstances. Therefore, here are five tips to consider in coping with this problem:

One - Estimate how much annual income you’ll need in retirement. In simple terms, do an income and expense budget and refine it regularly based on personal experience. A useful budget planner can be found at www.adfconsumer.gov.au.

Two - Regardless of your age, consider investing some of your current income/savings in assets that are more likely to pay a reliable flow of inflation-linked income (such as so-called ‘blue-chip shares’). Throughout your pre-retirement years, reinvest those earnings into the same or similar assets which will earn more inflation linked-income, thereby working towards inflation-proofing the purchasing power of your savings and the income that flows from them. If you are currently the owner of ‘blue chip shares’, you may be aware that some companies offer a Dividend Reinvestment Plan (DRP) which you should consider using. Real estate investments may also assist here as rental payments are likely to rise with inflation and demand for accommodation.

Three - As much as is practical, try to continue working until your assets are generating the income that fully covers your retirement living expenses calculated above.

Four - Several years prior to your retirement, consider ceasing the reinvestment of some of your inflation-linked investment income and put it aside in a safe place, say, in a suitable interest earning savings account with a bank. This money will be used to help with your income needs in your first year of retirement and will protect you if your investment income falls unexpectedly.

Five - Avoid using or selling your assets to provide for your income needs in retirement. If you do, it means that you’ll be speculating on the constant movement in asset prices which not even the most highly paid analysts are capable of doing successfully and consistently.  In the wise words of one expert: “An investor gets his reward from the maintenance of his holding whereas a speculator gets his reward from the disposal of his holding.”

These tips are principally designed for those who are yet to retire, however, even those who are already retired may benefit from following them.

WARNING
Every investment strategy involves risk and rewards. Attempting to inflation-proof your retirement income is no exception to this rule.

Therefore, these tips won’t suit everyone and aren’t designed to do so. They must not be treated as personal advice. They are simply designed as general education which investors might like to consider as they plan their personal finances. 

In order to receive some professional advice which is specific and appropriate to your personal circumstances, you are advised to consult a licensed financial adviser, preferably one who charges you on a flat fee basis or an hourly rate (not on a % of the value of the products that they sell you). 

There is some helpful material about choosing a financial adviser at: www.moneysmart.gov.au.  Also, we recommend that you view the film Financial Advisers – The Facts and the Fiction

Don’t become the victim of a cold call scam

Consumer fraud, or ‘scams’ as they are commonly known, costs Australians millions of dollars every year and are a growing concern for our consumer protection regulators.  The Australian Competition and Consumer Commission (ACCC) alone received over 83,000 reports and enquiries about scams from the public in 2011 with reported losses totalling more than $85.6 million. And these are just the reported losses.

Scams come in many shapes and sizes, but what they have in common is that they are intentional efforts to defraud people and the victims receive little or nothing for any of the money they part with.

In recent years, the prevalence of scams being promoted through ‘cold’, or unsolicited, phone calls is on the rise.  An increasingly common example is a is the cold call remote computer access scam.  This article gives you some background on how the scam often works and some practical tips for avoiding becoming a victim to cold call scams yourself.

What is a cold call remote access scam?
Generally speaking, these scams often start with someone cold calling you at home, saying they are from a large well known organisation, for example Microsoft or Telstra, or a technical support service provider.

The person then reports falsely that you have a problem – maybe that your:

  • computer has been sending error messages relating to a virus
  • internet service has problems
  • broadband connection has been ‘hacked’.

They will request remote access to your computer.  If you grant them access they will then invariably tell you that they have run a ‘scan’ and detected a problem.  They will request payment, often by you providing your bank or credit card details, for software or services you don’t need and sometimes didn’t even request!  Of potentially greater concern, some scammers will use the computer access you grant them to steal your personal information as well.

A recent example of this is the so-called ‘Microsoft Impostor scam’, perpetrators of which are currently being prosecuted by the United States Federal Trade Commission (FTC) having received assistance from regulators in Canada, the United Kingdom and the Australian Communications and Media Authority (ACMA).  This enormous fraud, which targeted tens of thousands of people in Australia, Canada, Ireland, New Zealand, UK and the US, used telemarketers who claimed falsely to be affiliated with companies including Dell, Microsoft, McAfee and Norton.  The telemarketers, after being given access, were charging consumers fees of $49 to $450 (USD) for removing non-existent ‘malware’ from their computers.

How do I avoid it?
The ACCC and ACMA have jointly published some useful straightforward advice on avoiding telephone scams – in summary they say you should:

  • Be cautious – if you receive an unsolicited call requesting personal information or access to your computer it may be a scam.
  • Protect your personal information – don’t provide an unsolicited caller with any personal information – no matter where they claim they are calling from.
  • Hang up – verify their identity independently from a trusted source ad call them back before providing any information or agreeing to anything.  If you receive an unsolicited call from someone saying you are owed a refund, have won a prize, or have a problem with your computer, just hang up.
  • Contact your bank immediately if you think a scammer may have your bank account details.

Where can I find out more information?
The ACCC’s SCAMwatch website  has lots of information on common scams, tips on how to protect yourself and allows you to report scams using an online tool.

For information about the Do Not Call Register – a free Government service allowing you to opt out of telemarketing calls and faxes – you can call 1300 792 958 or visit the website www.donotcall.gov.au.