Income Protection Insurance - do you have it?

It's a good peace of mind to have, it's one of those things you pay in the hopes you never have to use it but if you do need it you are glad you have it.

The biggest thing I have seen people make a mistake with is to not disclose the protection they have through super, it's a lot cheaper to "top up" your insurance than it is to buy it outright.

For example, if you have 300K of life cover in your super and you want it to be 500K you can simply get insurance for the remaining 200K through an insurance company, it does NOT have to be the same company that your super uses. Another trap is if you have multiple supers (never rolled them into one when you changed companies) then you have cover in EACH of them so make sure you account for that (or roll them into one and stop paying multiple fee streams)

Unfortunately I learned this the hard way and paid massive premiums for years because that's what the financial planner who set it up for me wanted (more premiums for him). I think a number of people got burned by him because when NAB got rid of him they invited me back to redo it with the head of that department. I declined, I have now cancelled my insurance but am looking to redo it with another company. Hope I don't die or get TPD'd in the next few weeks before I organise it though .

As for redundancy insurance, I have mortgage insurance that covers the mortgage in the case of involuntary redundancy (wish I had got that last year when I got made redundant but oh well). I don't need more than coverage of the mortgage so am not interested in paying more out there.

 

I honestly think anyone that doesn't have it that depends on a salary has rocks in their head.

Some of you may remember my rambling a year or so back about my back injury leaving me unable to work for over 12 months due to a number of complications from my surgeries. I had my policy through our SMSF, and during the time of injury was able to significantly expand my portfolio due to the income I received from the policy.

Without it, we would have been absolutely cooked. I had three months of leave but would have been without income for 9 months or longer if I was unable to rehabilitate.

From someone who actually been through the nightmare of actually needing it, I cannot recommend having it highly enough. My only regret is that I cheaped out on the policy giving myself the 90 day window from injury instead of 30, for something like 10 dollars extra a month.

My policy (with Asteron) is very reasonable, and as the SMSF pays for it, it doesn't affect "my" cash flow. I am covered up to 65.

If I continue to pay income protection for another 30 years, I will still not repay the benefits I received during this time.

 

I used to work in the industry and completely agree. The definitions are much narrower inside super which is why it is called IP in super and Disability Income when its outside super.

DI may also be tax deductible. So, definitely get proper advise from an independent broker before committing.

 

Hi Miked

I agree with Raydar

You run the risk of something happening and then the insurance company refusing to insure you

I would recommend a level policy till age 65 yr

The only downside I see with this is that you are basically locked in with this policy for life - so you need to ensure that the policy is good and right for you - and that company is large enough to ensure it will be around in 30 yrs time . Also check with your broker as
to what the company payout history is like - is it like drawing blood from a stone?

If you want to save yourself a bit of money I know that there are some company's that will rebate you the trailing commission for the exact same policy - so this might be worth checking out

Hope that helps

 

Like with all insurance we pay it and hope to never claim on it.

If you cant lose it (car, house, income,) then you should insure it.

A family member of my wife lost her husband who died from a wall falling down about a year ago on a job site. He didn't have life insurance and got nothing from the building site (I cant recall why). He left behind a wife and 2 children + one on they way (now three).

Yes it is a sad story that I hate to leave my wife like this if something was to happen to me however I pay 000s a year on life, tpd, trauma, income, house, car, private health, ambulance, road side assistance for both of us. I hope I pay $x00,000 over my lifetime and never claim as it would be much better than not paying that money and cry unfair.

Yes it would be nice having the extra money but like @WilliamB wrote you claim once on a significant thing it pays for itself.

Like trauma it is something like one in two males will have a traumatic event in their life and I think it was one in three women. Cost a fortune (when compared to life) but it is the most likely to be claimed on.

 

Yep to that point we are loaded up with all insurances. Life, TPD, Trauma.

I believe Trauma is the only one we have to pay personally. The others are all in the SMSF. I don't really care about the tax deductions at this point for the Income Protection. I just like the idea that "my" cash flow isn't affected.

If you don't have a full quota of insurances, get it done. End of story.

 

No I've got no income protection or life insurance. If I had kids I'd get it.

 

Do you need income protection insurance if you are no longer working for 'salary' and generate all other income from passive investments? (Living off rent, shares, etc)

 

If you have a mortgage I would be looking at getting both.

Otherwise your family will inherit your debt or how will you pay your bills if unable to work?

 

I wouldn't think so (I am not qualified to give financial advice though). However depending on your situation you might consider life, tpd and trauma.

 

I've got a mortgage but even with selling costs it's worth a lot more than the debt against it so if I passed away they could just sell it.
As for working I'm confident that I'd be able to get a job within a few months bar any unexpected physical or medical disabilities occuring.

 

Up to you, I am also confident that I'd be able to get a job within a few weeks if not months bar any unexpected physical or medical disabilities occurring.

 

I'll take my chances.

 

Too expensive

 

I don't have it, but should.

 

I'm with 2FAST4U.
You pay a whole bunch of money for something that may not happen. It's essentially weekly lotto with slightly better odds? I have no kids but if I were unable to work my other half could? There is always a way to make money, we have it pretty damn amazing in this country. The absolute worse thing that could happen is you sell up and pay back the debt (provided your portfolio covers your debt plus some). If I die, I'm confident my family can look after themselves and are self sufficient...

My views may change one day though if I have kids and a family, but I'm hoping the portfolio is positive by then, right?

 

Each to their own, it is your money at the end of the day.

You never know when something might happen and wished you had insurance, same as you could have insurance and never claim.

However I would rather spend the money and not need to claim then need to claim and not have the insurance.