Is Income Protection Insurance Really Helpful

• 

  John Kimble on 09/02/2017 - 22:45

  +3

  It's like any insurance really…you can't really say how important it is until you need it. How does anyone know you the chances that you'll need it?

  I have it but it comes with my super I think? I have a young family and a mortgage, so I guess there is a bit of piece of mind.

  With something so important, you really should spend sometime and read the fine print though… Each policy is different.

• 

  humdingaling on 09/02/2017 - 22:46

  +1

  General Definition

  Income Protection is designed to cover you temporarily if you are unable to work due to injury or illness, so that you're able to maintain your day-to-day living expenses during your recovery period.

  circumstances where it will cover you and be beneficial is written exclusively in the PDS

  You might find other income protection policies with different benefits or that pay you for longer or shorter periods during a claim. These differences are often reflected in the premium you pay. Some people have income protection insurance as part of their superannuation, but it's not always tailored to their individual financial needs. If you need more information on finding a policy that works for you, you should speak to an independent financial adviser.
  https://www.suncorp.com.au/insurance/faqs/income-protection/…

• 

  mskeggs on 10/02/2017 - 07:56

  +2

  I think it is necessary unless you have substantial savings or a spouse/family able to provide for you if were unable to work for an extended period.
  Consider if you got sick and couldn't work for 12 months.
  There are broadly two sorts of policies, ones that cover for 2 years and others that cover till retirement.

  I believe the longer policy is a fair bit costlier than the short one, maybe double? I haven't gotten quotes for years, but I think that is what I remember..
  Imagining worst case scenarios, there aren't that many circumstances where I would be unable to work for significantly more than 2 years, but where I wouldn't qualify as permanently disabled for the TPD benefit in my super.
  Yes, there are unlucky possibilities, but I imagine the bulk of claims would relate to periods shorter.
  A 2 year policy also gives some breathing space to restructure your life if you are faced with an ongoing issue that prevents you from working.
  So my conclusion is if the worst did happen, a 2yr protection would give you a glide path to work out a longer term arrangement. It's important here to understand I view insurance as a tool to remove some of the pain from a bad situation, not as a ticket in a lottery that pays off if something bad happens. So I can accept if I have rotten luck that I might face the rest of my life on a much diminished income, I'm not seeking to guarantee complete financial protection.

  My next step would be to talk to your Super fund about the products they have available, if they are an industry fund, they will have sought out the most competitive deal they feel is right for members. Private funds may have too, but some may also recommend options that are more profitable, so be cautious. Buying this insurance via super allows you to get a tax concession on the premium cost, which might save you 15-30%. Some funds will allow you to shop around insurers and choose your own cover, but I think you might find it hard to get a better deal than the group deals the super funds offer, unless you have unusual requirements.

  Some other things to consider, some policies (all?) only pay out after all sick leave is taken. Since I have about 12 weeks accrued this devalues the policy for me. I think all policies will only begin paying after you have been off work for a minimum of a month, so factor that into your consideration.
  And the premium varies according to your job and income. I don't know if different funds view different occupations inconsistently, but there might be differences in policies whether you are, for example, a team leader or a supervisor or a foreman, so how you describe your job title might impact your premium. Saying that, I think the insurers I looked at had only 4 or 5 categories (again, I haven't done this recently).

• 

  CTJR86 on 10/02/2017 - 09:27

  +3

  I work in Income Protection claims, personally. I think it's handy in theory - certainly if compared to the costs paid outside of superannuation for such a product and a much quicker underwriting process (if at all).

  As with anything - compare your product to what's on the market. Most garden variety products will offer a 90 day waiting period and a 2 year benefit as either their default product of choice, or their only product. Ask yourself - can you go 90 days without being paid? Because chances are that's the minimum time before you see cash. Whilst in theory you're paid from day 91 of injury, seldom are the claims processed in time for you to see it in your pocket from day 91 (claimant taking their time on sending paperwork back, lawyer involvement, doctors taking time on reports, backlog of claims whatever it may be). Generally, 90 days generally too long a waiting period for most things that have you off work that aren't going to necessitate a Total & Permanent Disablement claim instead, whilst 30 days premiums too high if you're someone that needs the cash urgently.

  Check your exclusions on the default/automatic cover. Some of the cheaper covers will have a list of pre-excluded occupations they won't cover (some are just obvious things like armed forces/stuntmen etc….other industry specific funds only willing to ensure for office based work, or cover cancels once you leave that employer). From there, assume what you may need it for. If it's mental illness related - its just not worth it IMHO. You spend that long waiting for your claim to be assessed, seeing so many doctors, filling in that much paperwork, in most cases it only exacerbates the illness/makes the entire process not worth the hassle. Chances are if you apply for additional cover, most will exclude this from being claimed on anyway.

  From there - see what the additional benefits/requirements are that suit your lifestyle (are you working overseas? A lot of insurers will now require you to come home at your own expense immediately if you're claiming. A lot of insurers now offer their own rehab programs these days - fantastic and helpful, far better than Workcover, all free, gets you back to work ASAP, but be mindful of their expectations from there too.). Find out what triggers the policy to be null and void (as I mentioned earlier - leaving your employer can trigger it. Army Reserves on weekends potentially. Do they cover elective surgery?

  It's a yes from me, but there's so much to look into based on your own individual circumstances that needs to be researched before agreeing to it.

• 

  burningrage on 10/02/2017 - 09:43

  +1

  Unless you are self employed, can I ask why this cannot be funded through your own Super Fund?

  • 

    CTJR86 on 10/02/2017 - 11:16

    +1

    Some products will offer it, but require so much work getting it all under the same banner, that it's barely an SMSF

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  inherentchoice on 10/02/2017 - 13:01

  +1

  Your super fund is probably already siphoning off some of your money to pay for income protection insurance so you probably have duplicate policies.

  Workers compensation will cover you if you get injured at work.

  CTP (or equivalent compulsory vehicular insurance) should cover you if you get injured in a vehicle accident.