Dropping Income Protection insurance

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Angel, 14th Jun, 2019.

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Would you pay the premiums if you were in my situation?

  1. Drop it

    10 vote(s)
    55.6%
  2. Keep it

    8 vote(s)
    44.4%
  3. Need more info

    2 vote(s)
    11.1%
Multiple votes are allowed.
  1. Angel

    Angel Well-Known Member Premium Member

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    Hi, I know my friends on PC are not going to give any financial "advice", but I value your wisdom and opinions.

    I have received a letter from my Super Fund that tells me they are going to increase the costs of my insurances and lower the benefits. For several months I have been seriously considering dropping some of the insurance altogether - I turn 60 next year and will retire sometime in the next 2-4 years.

    With the Income Protection, they are both reducing the length of time they will pay out, from 3 to 2 years, and increasing the length of time before they start to pay any potential benefit. In my case it would not be until I use up all my accrued sick leave. This is now at 15 weeks. The premium is at least $900 a year, I am considering taking my chances. Other than cancer treatments, I cant think of any diseases that last longer than 15 weeks and we have a spare house or two already.
     
  2. wylie

    wylie Moderator Staff Member

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    I'd keep it. $900 a year is a very small price for the peace of mind you get.
     
  3. kierank

    kierank Well-Known Member

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    With insurances, my motto is: "If you CAN'T afford to lose it, then you CAN afford to insure it". It is that simple.

    It always amazes me when people don't insure something (say, their house) and then go bonkers when they lose it (say, in a fire).
     
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  4. Marg4000

    Marg4000 Well-Known Member

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    I voted to keep it.

    Unless you can afford to retire NOW if necessary, and are just staying working for other than financial reasons, $900 per year ($20 per week) seems a small price to lay for peace of mind.

    You can always revisit this decision later, but if you drop it you may not be able to reinstate it without medicals.
    Marg
     
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  5. Noobieboy

    Noobieboy Well-Known Member

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    I would keep it @Angel
    Unless you are under 40 or you are about to retire. $900 isn’t that much. On the other hand, check ANZ insurance. Might be a bit cheeped and much more generous ;)

    I dropped my super insurance and went with ANZ. Got more in “possible” benefits for about 30% cheaper.
     
  6. Joynz

    Joynz Well-Known Member

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    The only question is: if you couldn’t work, could you meet your financial commitments?

    If the answer is ‘no’ then keep it. If ‘yes’ then drop it.
     
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  7. HUGH72

    HUGH72 Well-Known Member

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    You didn't mention if you have any other insurance? It also depends on the level of debt and assets held.
    I would hold onto the insurance personally as it isn't very expensive and you may need it.
     
  8. Angel

    Angel Well-Known Member Premium Member

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    ANZ quote is $197 per month with 90 day wait and NobleOak is $105 per month. The QSuper premium isnt so exxy after all.
     
    Last edited: 15th Jun, 2019
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  9. MWI

    MWI Well-Known Member

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    For $900 I would keep it!
    My spouse has stepped insurance for many years BUT for the last 4-5 years I have been decreasing the SI as his premium at similar stage of life is now exponential. If I retained the LI coverage it would be around $15K a year not $900 and increasing exponentially. In addition I thought how much coverage do we really need, especially now that we have choices, could really just liquidate few assets to pay all of the debts (net worth hence much much higher).
    Income protection we dropped years ago as we had alternative passive income, also being in business and self-employed meant we would unlikely draw on insurance if such a situation arose.
    Reminds me how many years ago (20 or so) I saw a financial adviser who then recommended $20K in premiums per year in various insurance coverage to maintain our standard of lives, now imagine the premiums today? Thank goodness, firstly: we are still here and healthy for now, secondly: we never acted on that advise (funds deployed into further investments served us very well).
    So while no doubt there are many cases for various insurances cover such when young family heavily mortgaged but it should change as our financial situation changes, note not just the age situation but financial!
     
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  10. Angel

    Angel Well-Known Member Premium Member

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    D and TPD are higher again, I will not drop those given our mortgages. I already decided yesterday to keep our lower-level private health insurance as is - they have removed some items from hospital cover at our level but added others.

    OK, I will keep it for now. My entire salary covers the mortgage on our PPOR. (The IPs take care of themselves)
     
  11. hammer

    hammer Well-Known Member

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    Look into exactly what you get for your dough.

    Some of these insurances only cover you for your "ability to work". So for example if you're a truck driver and you lose both your arms, technically you could still work as a painter...using your teeth.

    I believe there are better insurances that cover you for your career...

    Not saying that yours is like that but definately worth researching further before deciding to keep it.
     
  12. Joynz

    Joynz Well-Known Member

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    Also check that you will be covered - for example that there are no age exclusions for some illnesses.
     
  13. Blueskies

    Blueskies Well-Known Member

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    I think the easy answer is to keep it, it is a nice safety blanket.

    However 2 years out from retirement, AND you have 15 weeks sick leave AND you are hopefully in good health and a strong financial position with assets AND its $1800 you could keep in your super and put to a nice holiday on retirement. I voted to drop it.
     
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  14. SatayKing

    SatayKing Well-Known Member

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    And possibly one aspect of how hard the insurance provider fights NOT to pay out. That could be a difficult one to determine though.
     
  15. wylie

    wylie Moderator Staff Member

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    Don't forget that even if your insurance covers your mortgage, you have to pay bills and put food on the table as well.

    And we kept ours because even if rents cover the loans and property expenses, and even if we had enough to live on, if one needed round the clock care at home, who pays for that?

    If one person must give up work to care for the other, there goes the only income left coming in (other than rents).

    Many years ago, when we increased our borrowing, our insurance broker pointed these things out to me. I'd thought we had enough cover because our loans were covered by rent. He suggested higher cover to allow the cash payout to be invested to create an income stream to replace the income lost by either party (or both in some cases if one must become a full time carer for the other).
     
  16. wylie

    wylie Moderator Staff Member

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    Also, from July 1 you need to opt in if you wish to continue to be insured within within superannuation. I was told this is a government rule, so I'm sure it isn't just our particular super fund.

    If you don't opt in, the cover will cease according to our super fund when I called to check.
     
  17. Jamesaurus

    Jamesaurus Well-Known Member

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    Not to scare you or anything, but statistically there are a host of many other degenerative diseases that can cause one to lose their inability to perform their activities of daily living including their work. Also take into account that accidents in life also happen. I'd be mindful of that fact when making your decision. All the best