Income Protection Insurance - do you have it?

Looking at getting IP insurance at the moment - but was surprised by the cost.

Quote through super was about $100/month, for roughly 5k worth after 30 days, indefinitely.
Another quite $35/mth for same amount, 90 day way, but only 2 years.

Not sure what to do though - 100/mth seems excessive with only 400k debt (atm) and no kids. Was thinking going the cheap option until kids come along, and then re-think it, but keen to hear others' thoughts.

Do you have IP insurance? How long does it last and when does it kick in?

 

I do and if you have a family with dependents then I believe it is a must have.

I have mine through australian super coverage is about 75% of income can't remember how much I pay.

 

Mine is in my super. Was paying $21 outside super plus $13 inside super, put all of it together and was just $16 per week inside super for the lot.

I also carry Professional Indemnity.

 

Conscience I just ran an online quote with my super fund today. I'm not confident I filled in all the information correctly, the quote lacks a lot of detail ,but it came back with
$365.44 for $88000 for 5 years after 30 days waiting period
$523.68 for $1010000 for voluntary death and terminal illness
$291.89 for $1010000 for voluntary total and permanent disablement

 

Yep - insured up to the eye balls. Not something I really worried about too much before starting a family - now it's a huge peace of mind.

 

Insurance - the great what if.... I know one chap who has been incapacitated (but no injury), will never work again. Insurance was reluctant to pay out however he is now getting his regular monthly payments for life (he wasn't 50 when he contracted the illness).

 

I was also told that redundancy protection addons to income protection insurance are worthless due to all the conditions for cover to be paid.

 

I have life, income protection, tpd and trauma insurances, held in a mix of personal and smsf.

 

Can someone elaborate on what 'voluntary death' covers?

 

Staying the night in Elizabeth Park of your own accord

 

Yep.
Mostly outside super for lots of reasons that I can't recall now. I think it was related to timing of payments, payments stopping at retirement age and things like that.
My insurance is set up to cover what would be a lifetime of working and investing. Not a lottery, but my kids would not every have to worry about a cent whilst they grow up.
Costs a lot, but not as much as if I were out of work for more than a couple of weeks.

 

Nothing for me. I consider myself to be no more than a humble ant who's clinging to a rock that's hurtling uncontrollably through space.

 

Haven't got it but should probably get it

 

Yes definitely, I have range of cover inside out outside of super. Paying $170p/m for level premium. IP ~$7k p/m TDP/Life ~$800k & Trauma ~$300k

 

We do. Our financial planner assisted with this when we setup our SMSF. Most of our cover is paid via the SMSF, great as we see very little out of pocket expenses week to week. It covers TPD, income protection and trauma cover. Whenever we gain further assets, we reassess. If either myself or wife die unexpectedly, ALL debt is covered.

 

Yes I have income protection

I would recommend IP from the moment you start working

I think your earning capacity is the most important thing you need to insure

People don't hesitate insuring their car or their house but hesitate insuring your earning capacity - it's seems crazy

I am a health professional - earning a pretty good income - it has allowed me to invest in several investment properties; without that income I would be stuffed

A few points to consider

Ensure you get own occupation IP
That is that your IP will pay you if you are no longer able to perform your job and not just any job eg if you are a carpenter and lost the use of your arm and are no long able to work as carpenter - some policy's will not pay out if you can work in another profession.

I recommend to all my young colleges to lock in a IP policy as soon as they graduate and lock in the max amount they can insure for at a level rather than stepped payment option - and increase the amount of cover as your income increases

The reasons for this

1. It's possible to get a career ending injury at any age - I have a friend who lost the sight in one of his eyes 2 yrs after graduating from dentistry - he was unable to continue working due to loss of depth perception - his IP kicked in

2. If your health situation changes latter on in life - insurance company's may refuse to insure you if apply for insurance or if you have IP they may refuse to allow you to increase your insurance or at the least charge you a very large price penalty
Eg I have a friend who got IP when he graduated but then got a stomach condition which has caused him to have long term digestive issues and has supposedly increase his chances of stomach cancer - his insurance company has refused to increase his insurance level - so he is stuck on graduate salary level income protection despite his income is now 3 times that level.

3. Lock in a level rather than a stepped policy . You generally have 2 payment options with regards each IP policy . If you pay Level - you will pay the a bit more to begin with when compared to stepped but it stays at about the same level for the life for the policy . Whereas a stepped policy is cheaper to begin with but the premium increases each year at almost a logarithmic rate. Their will be a point where the level policy will be way out in front in costs savings.

I have held my current policy for more than 10 yrs and the premium has stayed at about the same level as when I started the policy where as if I was on stepped I would have been paying in excess of double and this would have quickly increased to triple the amount in the next couple of years

The problem with stepped is clearly it costs you more in the long term -

When you need IP the most is in your mid to late 40's and onwards as this is when statistically health problems arise however if you are stepped this is when the policy will get exceedingly expensive - My brother in law (48 yrs old ) had a $8000 IP bill last year - he shopped around and got a better deal and locked in a level policy

The younger you are when you lock in a level policy the cheaper the premium will be

The devil is in the detail - check that the policy will payout on partial disability without being fully disabled during the waiting period - eg you are a vet but suffer from chronic back pain - you are only able to work for 4 hours instead of the usual 8 hours in the day or 3 days instead of 5 days - your income has dropped by 1/2 . Some policy's will not pay out because you where never fully incapacitated ( you did not fully stop working )

You can save yourself a bit of money if you able push out the waiting period before your IP kicks in eg 3 mths instead of 1 month - that is you feel you can sustain loss of income for 3 mths ( you have enough back up savings ) but obviously cannot sustain ( no income ) if you are out of action for longer ( the difference between breaking your arm or breaking your neck )

I would recommend a policy which pays out to 65 yrs age rather than 2 - obviously if you sustain a injury that prevents you going back to work ever again - you want to make sure you and your family are looked after

I bought my policy out of super as the premium is tax deductible and there were issues with IP bought in super at the time ( they were limited to 2 years of payments rather than till 65 yrs of age - it is my understanding that this has changed now )

I hope this helps - I am not a insurance broker but I did a lot of research on the topic years ago when looking at which policy to get. However please double check this info with your insurance broker as things have obviously changed in the past decade since I got my IP policy - I think the basics are still the same though

If you are wondering - I have a Zurich Insurance Policy

 

These were some of the considerations I had also.
However, Zurich don't cover mountain bike racing (i believe only Asteron does, hence I'm with them).

 

Perfect Arctic, thanks for that - just the sort of info I was looking for!

Is it viable to get a 2yr policy and change to 65 year after kids (in approx 5 yrs), or better to just get it done early?

 

Comes down to how you assess risk. What if something happens in the mean time and you claim on your 2yr policy...Would you be eligible for a new 65 yr policy? Or have you just thrown away 63yrs of future income. Kids are definitely a catalyst for thinking about these things, but what about your IP's, are they neg geared? Could you service the debt after the two years? How would you not working effect your partner? Just some things to think about.