Income Protection Insurance - do you have it?

Discussion in 'Loans & Mortgage Brokers' started by miked, 18th Aug, 2015.

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  1. Big Will

    Big Will Well-Known Member

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    Completely agree, I don't enjoy paying it and don't feel entitled or feel rich paying the stuff but IF something was to happen I am still going to have an enjoyable lifestyle.
     
  2. wylie

    wylie Moderator Staff Member

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    On a similar topic, we've always insured ourselves to cover our loans plus several hundred thousand more to invest to provide us an income. When we had small kids, it was great to cover our debt should either of us have died. But having no debt would go only half way to allowing the one left to stay home and look after three kids.

    Without the extra cover to give us money to invest, the one left is not only grieving, having to look after the kids, but also forced to go back to work to put food on the table.

    With the extra couple of hundred thousand insurance, the loans are repaid, the rent rolls in but there is also money to invest to add to the income and provide for any big requirements.

    This is something many people don't cater for, or think about.
     
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  3. Dan Donoghue

    Dan Donoghue Well-Known Member

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    This is a very very common theme, they give so many delays in the hopes that the claimant "gives up", it can be an exhausting process and unfortunately there are no rules to say that this can't happen.

    The entire claims process in this country needs a massive microscope on it and some guidelines putting in place to protect the client rather than the companies bottom line.
     
  4. wylie

    wylie Moderator Staff Member

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    One of these people received a VCR tape (back when VCR tapes were still used) in the mail showing her inside her own house, going about her usual business at home. She was very intimidated. She was doing nothing wrong, and had she been stronger, she could have pushed this invasion of her privacy further. However, she was not well enough to do so, took their "go away" money and probably wishes she had taken out a better policy.

    The person I know who has been paid for many years has had to go to battle to keep the benefits flowing. These companies try very hard to clear their books, offering small carrots rather than continue to meet their contractual obligations. This person also has to jump through hoops every month, reports, doctors statements just to continue to be paid. They don't make it easy.
     
  5. Azazel

    Azazel Well-Known Member

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    True. It's not as bad as the US (hopefully it never gets to that ridiculous level) but I've seen insurance companies stuff people around for all sorts of things.
     
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  6. Big Will

    Big Will Well-Known Member

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    Done the same thing for life or tpd where debts are cleared and extra to keep funding our lifestyle.
     
  7. miked

    miked Well-Known Member

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    Insurance is unfortunate, in that you hope it's a giant waste of money... basically lose lose.
     
  8. Big Will

    Big Will Well-Known Member

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    Cost of doing business, same thing with private health cover got that to and hope I never have to use it but when our daughter was born we really appreciated having the extra time in the hospital with the nurses.
     
  9. Heinz57

    Heinz57 Well-Known Member

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    Have always been insured up to the eyeballs - life TPD income and trauma. I added up the other day and it is now $12,000 a year for 2 people. Even after reviewing the income levels and declining the automatic increases. As you hit your fifties these premiums go through the roof.

    Add in health insurance and that's a lot of money. Fear keeps us paying the premiums.
     
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  10. Aaronjod

    Aaronjod Well-Known Member

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    Yeah, I don't disagree with you. I don't have any kids but like I said one day my view might change.

    I run the risk of "what if it doesn't happen" and I've paid all this money. I have seen first hand people live off welfare and live in a house in a more desirable location than I could afford myself. Housing isn't glamorous but I run the risk that if one day I am incapacitated and go near broke, the worst case scenario is I get some of those taxes I've paid over the years. That is, until I am capable to get back on my feet. It's not really like I'm going to go hungry in this country. But this isn't where I want to end up.

    I'm in to investing with my partner, and she fully understands why we do what we do. Should something happen it
    is my goal to have educated her well enough to make the right decisions. I suppose essentially she's my insurance company and I'm hers, only I don't pay her a premium...

    Then I hear about all the dirty tricks they try to do not to pay and to reduce it so I just figure I don't want them to have my money.

    I do feel we are at two different ends of the spectrum in regards to circumstances though.
     
  11. Arcticfire

    Arcticfire Well-Known Member

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    Before I say anything else I would like to say that I am not a insurance broker or a financial planner - anything I say is based on my own personal research - most of which was conducted over a decade ago . Please double check everything with the appropriate industry specialists before making a decision.


    This has been a topic of personal interest for me as I have seen the benefits of ip insurance first hand

    However for me to say everyone should buy IP insurance would be wrong as everyone's individual financial/personal position is different

    Let's take a look at it this way

    Would most people here agree if IP insurance was free then we should all get it

    If you feel that free IP insurance is a bad thing - then good luck to you

    If you agree to that - let's take it to the next step

    IP is obviously not free - so then

    Can you afford it ?

    If buying IP means the difference between putting food on the table or paying the electricity bill - I can tell you now what I would be picking - and that doesn't involve a insurance broker getting a trailing commission.

    If you can comfortably afford IP insurance then you need to make a decision as to weather it is right for your circumstances at this point in time

    But this decision should be an informed decision

    You need to make this decision knowing what the consequences are of not buying IP now and vice versa what are the consequences of buying insurance now would be ( particularly the financial cost )

    I have seen several people make the comment that they feel that do not need IP insurance now but would consider when they have kids

    This decision is fine as long you understand what the consequences are of that decision

    The risks of buying IP at a latter point - as I understand it are

    1 . A trauma or health incident may occur the prevents you from working for x amount of time - causing a loss of income . This time may range from a couple of weeks to indefinite

    2. A health issue may occur which causes the insurance company to refuse insuring you or charge a penalty loading on top of the premium to cover their increased risk of pay out ( when I first took out my IP insurance policy in my mid to late 20's I was a lean mean fighting machine - now I'm in my mid 40's - I'm about 15 kg overweight - I'm on high blood pressure and cholesterol medication - now having said that - I've just taken out gym membership and trying very hard to change that problem - the point I'm making is things change )

    3. The cost of starting a level IP insurance policy is much cheaper when you are younger and gets more expensive as you get older . If you are comfortable getting a stepped premium policy ( I don't advocate this ) in particular - the premium increases almost logarithmically as the age increases. I would recommend asking a broker how much insurance would cost if you took it out now and what the cost would be if took it out in 5 or 10 yrs time

    Now if you understand the consequences of delaying/not buying IP at this point in time - and then make a decision based on these facts then I feel you have made a informed decision based on your current circumstance - and that is the right decision for you and your family

    However if you try to make a decision without knowing or understanding the consequences of your decision - then I feel that this would be wrong - for you and your family

    I feel that this is a important conversation to have and I am grateful someone sat me done and had this same conversation with me when I was younger - I have meet people who unfortunately did not have this conversation or take the time to do the research when they were younger and did not understand the consequences of not buying the IP insurance at that time and quite a few of them say they would have done things differently.

    I would be curious to see if people feel my train of thought is correct or not - or if they have a different take on things.
     
    Last edited: 22nd Aug, 2015
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  12. Jaye Kershler

    Jaye Kershler Well-Known Member

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    I have income protection it was $2450 per year. 30 day waiting period cover until I'm 65 they would pay me $7000p/month
     
  13. Jkat

    Jkat Well-Known Member

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    I have life insurance and TPD (total permanent disability). It is the more expensive one because it is insured for my specific job/skill set rather than a general job or generic role.

    However, I don't have income protection because we don't have dependents and i feel like th elife insurance/tpd covers me sufficiently.

    Your own personal circumstances will dictate what you need and how much you are willing to pay for it. risk vs. rewards/SANF
     
  14. JDP1

    JDP1 Well-Known Member

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    Yeah so do I...set and forget stuff.
    I'm also thinking of getting marriage insurance in the future..ie a pre-nup.
     
  15. Azazel

    Azazel Well-Known Member

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    Ooh, adult concepts.
    There was a thread for pre-nups here somewhere...
     
  16. Chris White

    Chris White Well-Known Member

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    Yes, I think from memory the benefit payment period may only be 2 years as opposed to age 65. There may be other limitations as well.

    I would be interested to know from the financial planners out there, what the limitations through Super may be at the moment and if this has changed?

    IP is a necessary cost I think.
     
  17. LibGS

    LibGS Well-Known Member

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    For life insurance how much should you cover yourself for. Let's say you estimate you will earn $2,000,000 between now and retirement. Is that the level of cover one should look at?

    The reason I ask, is that this was what an agent recommended. But of course he had an interest to sell more.
     
  18. Casteller

    Casteller Well-Known Member

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    I had it because it was compulsory when I lived in Switzerland. When one of my contracts ended (after working and paying contributions for 7 years) I was "unemployed" and the policy paid me 80% of my previous salary until I got a new job. Bit of a disincentive to get a job really, it was nice being on holiday in Switzerland and applying for the odd job while getting paid 8000 a month.
     
  19. Big Will

    Big Will Well-Known Member

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    Our FP said to clear debts and then how much would we need if the other person wasn't around to live off for 30 years (as we are 30).

    E.g. Mortgage of 500k + 50k p.a. for 30 years = 2M
     
  20. MggBris

    MggBris Member

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    The member needs to satisfy a condition of release from within their superannuation fund. If the premium is payed outside of super the same conditions to do not apply. It is worth seeking financial advice in and around structuring your insurance. Benefit periods and percentage of income payed out monthly should as this will differ from fund to fund. Income Protection insurance for property investors is vital as you do not want to have to fire sell a portion or all of your portfolio to pay for medical and personal expenses.
     
    miked likes this.

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