Income Protection Insurance - do you have it?

It should all depend on your personal circumstances, age, married, kids, debt levels income and expenses. There are many things that need to be looked at, not just a generic $2mil cover.

 

Thanks to this thread I enquired about life insurance a couple of weeks ago. I am a low wage earner and the premium I was quoted was $440 per month - definitely not something I can budget for in the immediate future so will have to go without.

 

Are you sure it was per month, not a year?
I have mine running through my super, like some others on here. Its just under $100 a month, and covers, Death benefit, Salary continuance, and Total and permanent disablement.

 

Unfortunately it is $440 per month - wish it was per year. I too have one running through my super but I wanted additional cover.

 

How much coverage were you getting for 440 per month and/or how old are you/risk?

 

I don't think the broker mentioned the coverage - I've set out part of his email below:
"A ballpark figure for income protection insurance for you with a robust policy (as opposed to a number of the bank type policies which do not rate well features wise) is around $440 per month. I have access to the leading twelve insurance companies, each having different levels of features within their policy options."
I'm 54 and a non-smoker.

 

Can you increase your cover inside your superannuation...? UnfortunatelyoOnce you turn 50 premium prices really start to increase..

 

That's something I'll have to look into.

 

Probably due to underwriting and the biggest part might be age and potentially occupation and/or Health which you would know.

Taken from the suncorp website;
http://www.suncorp.com.au/insurance/life-insurance/income-protection/frequently-asked-questions
Underwriting is the insurance company’s way of assessing your occupation, health, lifestyle, age and earnings to determine if you can be offered cover. Underwriters decide how much premium you need to pay each month for the insurance and also determine if any special conditions need to apply to your policy, such as exclusions of cover due to high risks. It’s important to correctly and fully disclose all the information we ask for in the insurance application questions to ensure your policy is valid.

 

Thanks Bill Will.

 

Yep, I have it.
If you can afford it, always best to go outside super. otherwise inside super at a bare min.
go for a 90 day wait to get approx 30% off the premium.

Cheers

Cashflows

 

After revisiting the whole IP issue again after a decade through this post I realise that that the it's still very complicated area

It is not a simple case of buying the cheapest policy out there

You almost need a degree in financial planning to understand it all

For example

Are you aware that their are 3 main types of income protection policy's which are based on how a payout is activated

1. Definition based
2. Hours based
3. Income based

The vast majority of the policy's are definition based or at least they were 10 yrs ago

The policy I got and locked in over a decade ago is a income based policy which I believe was the best policy for me at the time

It is my understanding now that their are policy's on the market which incorporate all 3 in one policy which allow for a payout if at least one of the 3 criteria is meet allowing for a more likely chance of payout - I think these types of policy's are definitely worth checking out

The link below is to a article which explains the 3 main types of IP insurance available and the advantages of the new types of IP insurance which combine all 3 in one

Please note I am not affiliated with the linked website in anyway and I have no idea who that company is or if they are any good - just thought the article was quite good

http://www.lifeshield.com.au/IncomeProtectionDefinitionofDisability.html

Just to make things more complicated - another point you will need to consider is wether you take out a agreed value policy or a indemnity value cover
I have agreed which is more exspensive but gives you more certainty on the payout amount - see below link which discusses difference between the 2 ( I have no affiliations with the 2 linked websites )

https://www.lifebroker.com.au/income-protection/agreed-value-or-indemnity#.Vd72qYpknCQ

Here is another link on agreed vs indemnity value policy

http://www.wealthsmart.com.au/2014/07/comparing-agreed-versus-indemnity-value-cover/

I think if you are self employed and your pay fluctuates then you should go agreed if you are a employee with stable income that can only go up then indemnity value maybe the way to go - you should discuss this with a specialist in the area

Now with regards to buying IP in a SMSF or not - 10 years ago all IP bought through a SMSF were only allowed to payout for a max 2 yrs - this automatically eliminated it as a option for me as I needed IP insurance to cover me for my entire working life . However rules have now changed and IP policy's bought through a SMSF are allowed to payout till age 65

Points to consider IP bought outside super is tax deductible at your personal tax bracket - the higher your income the greater the discount

IP bought in a SMSF gets you a 15% deduction as it counts as a contribution

It is my understanding the IP policy's bought in super funds are very basic eg no own occupation options etc . My insurance broker says it possible to buy a basic policy with superannuation and buy all the bells and wistles out of super ( I have no idea how this is done )

Based on my research it appears buying IP in super maybe the way to go if you are on low income and a basic IP is right for your circumstances particularly if cash flow is a real issue. However expert advice should be sought to confirm how a payout occurs through super and if this policy is sufficient for your needs

On top of these points as mentioned previously you will need to consider the implications of a stepped or level policy; the importance of own occupation; the risks and benefits of starting a policy at a early age and the decision of benefit and waiting periods

I have a headache just thinking about it

let's compare this to life insurance - simple - when your dead your dead - payout occurs - the only thing you need to decide on is if you want level or stepped or a mixture of both and how much cover you want. I think you should get it in super as it counts as a contribution - it is not tax deductible

Another point to consider that may save you some money is the fact that there are company's out there which will give you back the trailing commission for the exact same policy . I'm sure my broker won't like me saying this but when you have decided which policy is right for you then it seems crazy not get a quote from one of these guys for the exact same policy to see if you can save yourself some money.

As I have mentioned previously I am not a FP or insurance broker the information I have provided is from my own personal research and maybe out of date or inaccurate ( or just plain wrong ) and I strongly advise you have a chat to a FP or insurance broker to confirm what is right for you - it's usually free to get advice

I'm very happy to be corrected on any of the points I've made

 

Hi guys,

Recently bought an income insurance through Medibank Private and just wanted to see people's thoughts.

 

I had a review with my FP and realised that I didn't have trauma cover with my last FP. Otherwise everything is ok...maybe a bit of increase for income protection. I think a detailed discussion with a FP is warranted.

 

Did you use a financial planner? They would be able to assess your assets, see what level of cover you require and are usually very knowledgeable regarding various insurance options. Best of all they are free as like a finance broker, they get an initial payment and trail from the policy provider. Of course it's good to confirm what they are saying and do your own research.

 

Thank you @larrylarry and @Raydar. I didn't talk to the FP and just actioned it without as much thought, maybe because it was only costing me $11.

 

Well something is better than nothing

 

Just my thoughts anyway. I'm not versed in insurance so a FP to advise would put me at ease.

 

Take care with thinking super IP benefits are worth it.
- Long wait times are very normal...eg 90days +
- Own occupation v any occupation definition (Group policies often refer to any ability to work)
- Need to meet SIS definitions of total and permanent incapacity to get paid. That isnt sickness or accident its DISABILITY. You do your knee ligaments or maybe even lose a leg and you may get nothing if you can still wor after rehab.
- The tax deduction is just 15%...Lower than at marginal rates