Income Protection Insurance - Yay or Nay?

jay889344 on 29/06/2022 - 17:51

Hi everyone,

Just wondering how many of you out there have Income Protection Insurance and have you found it helpful? I'm contemplating signing up to it and would just like to get an idea of what proportion of people might be doing it and of those people, how many of you have actually been able to benefit from it so far? With various types of insurance seeming to find ways to not pay out, thought it would be good to get some views from the Ozbargain community on their experiences with it.

Cheers :)

Financial Income Protection Insurance Insurance

Comments

  • Cheeseplate on 29/06/2022 - 18:00
    +6

    Yes. Best case scenario is i pay for it and never need to use it.

    • AustriaBargain on 30/06/2022 - 05:19
      +2

      Worst case is your spouse comes to despise you and realise you are worth more to them dead.

      • dust on 30/06/2022 - 09:33

        Does your spouse still get paid out if they murder you? I reckon there's something in the terms that addresses that.

        • AustriaBargain on 30/06/2022 - 09:35
          +1

          I hope anyone I call a spouse would be smart enough to make my murder look like an accident.

        • mrtin on 11/07/2022 - 22:10

          Not a bad question.
          The strangest question I had was "does it pay out if you disappear overseas eg kidnapped?"
          Answer at that time was (as usual) it depends on the scenario at hand eg it could be disappeared presumed dead then it would pay out.

  • Batman01 on 29/06/2022 - 18:22
    +1

    If you have a mortgage and dependents then you should have income protection unless you have rich parents to back you up.

  • Nugs on 29/06/2022 - 18:30
    +3

    poll?
    .

  • bobbified on 29/06/2022 - 18:55
    +1

    Well, I was glad I had it when I needed it - just like any other insurance. The initial approval and payment can take a few months especially with the waiting period but no other issues other than the need to provide regular medical evidence (for me, it was every couple of months).

    I had almost a couple of hundred grand paid out over a period of about 18 months. From a claim acceptance point of view, my condition was pretty black and white so there was no question re my capacity to work (but acceptance experience can be different when it comes less clear conditions such as stress and other mental health issues etc where it's not so clear and capacity to work is more subject to opinion).

    A lot of people in white collar jobs might find that they have this cover within their super policy already. Having it in super might aid cashflow for some people (vs having it separately and having to pay the premiums directly out of pocket). Just need to be mindful of the limitations with multiple policies - the max total payable is 75%+super, regardless of the number of policies one holds across any number of insurers.

  • tsunamisurfer on 29/06/2022 - 19:03
    +5

    I used to have IP. It gave some peace of mind, and is tax deductible.

    What changed my mind was the premiums increased a lot each year, they told me as I got older the premiums would increase but it was getting ridiculous.

    It was over $2k per year at one point.

    I have instead opted to self insure and do everything I can to be in a safe situation.

    Paid all debts, have some passive income and build savings.

    • cashless on 30/06/2022 - 08:22
      +2

      Absolutely back up this statement by tsunamisurfer. I had IP insurance for many years as the earner in a single income family with small kids growing up. It made sense.
      The annual premium hikes are difficult to swallow, so I found myself downgrading and reducing the policy.
      Several years later, the kids are nearly out of school, my partner works again and household debt is considerably reduced.
      Gave IP the flick. Very happy about that decision.

    • Shibuya on 30/06/2022 - 09:59

      +1. Exactly my scenario too, had IP for over 15 years and without fail the premium kept going up every year - so I cancelled. But lucky for me my new company gives all staff IP at no cost.

      • isthisreallife22 on 30/06/2022 - 10:24

        Can you elaborate on this employer provided scheme?

  • Benoffie on 29/06/2022 - 19:05

    Could never get it for a reasonable amount.

    You need to get an assessment and weigh up the annual fee versus your income. Unfortunately for many (especially women), it turns out that the odds are not in their favour.

    • bobbified on 29/06/2022 - 19:11

      Could never get it for a reasonable amount

      Did you factor in the tax deductibility of the premiums? For lots of people, it'll mean about 30% or so (depending on your income) less than the quoted premium.

    • sjj89 on 29/06/2022 - 19:27

      Curious about the “(especially women)”

      Why?

      • Benoffie on 30/06/2022 - 00:25

        Pregnancy or ability to become pregnant is a negative factor as is breast cancer history in family even if occured over 65, any gynaecological conditions.

        Then there's the lower income. At one stage I was quoted $4k pa to cover $60k income. On what planet would that ever make sense?

        • sjj89 on 30/06/2022 - 08:45
          +1

          No planet. Completely messed up.

      • mrtin on 01/07/2022 - 23:13

        I've always noticed life and ip premiums for females were more expensive than male after around 25-30 yo. Young males are riskier than females!

  • AndyC1 on 29/06/2022 - 19:50
    +2

    Most super has it available, but it depends on what you want it for and to cover.

    • Broke-Ken on 29/06/2022 - 20:54
      +1

      I second this. Check with your super, some funds have it already, some require you to pay a bit more for it. So you can check if you have it, if its an additional see if it's cheaper than the insurance you're already looking at, or look to move to a super fund which has it included.

  • SenatorDC on 29/06/2022 - 20:33

    Make sure it's for comparable work ….cheap policies might require that you can't get any work eg hey if you can work as a janitor then we won't pay you.

  • ihbh on 29/06/2022 - 21:20
    +1

    Income Protection Insurance - Yay or Nay?

    Depends on your circumstances - why do you need it?

    Note, insurance is not there to profit from. The best financial "return" is to come close to being even (over your life income situation), when a disaster of sorts strikes. Be careful what you wish for.

  • SmiTTy on 29/06/2022 - 21:35

    Yes. I have mortgage and kids that will be costing me money for a while still.. I can't afford not to have it

    I need to know that'll all be looked after if I can't. That also means life (death) insurance along with the IP

  • pippohippo on 29/06/2022 - 23:17

    Initally thought nay. But after seeing relatives making a claim, even for the 2 years, definitely a yay.

  • jay889344 on 30/06/2022 - 08:26
    +1

    Thanks everyone. Your thoughts and experiences have been enough to convince me to do it. I just bought my first house last year and have my partner moving in with me shortly. We plan to probably get hitched and hopefully have some kids in the next few years, so think I'd rather know that security blanket is there if something happens to me. We wouldn't be able to cover the mortgage with just her salary unfortunately.

    Thanks all :)

    • isthisreallife22 on 30/06/2022 - 09:47
      +1

      Maybe we can research this together either on this thread or pm.

      • mrtin on 01/07/2022 - 23:17
        +1

        Would ppl pay for a comparison service? Not one of those price Comparison only. A full comparison also including definitions and features of 1 policy to another. Weighted and ranked by score.
        I'm guessing no one will compare wordings in PDSs between policies.

        • Terbo on 09/07/2022 - 15:00

          Its called financial advice. If you want to do it yourself you could start with Riskinfo website, that has basic quotes and PDS info. Financial advice software can compare everything, including wordings between policies and give a plain english explanation and rating.

          • mrtin on 09/07/2022 - 19:08

            @Terbo: Yes. But would ppl just pay for the comparison? No personal financial advice. Client chooses say 3. Comparison report is done and sent to client. Client pays.

            • Terbo on 11/07/2022 - 10:35
              +1

              @mrtin: People will pay for anything if they value it. Determining right level is one part, right product or combination, structure and strategy, application, admin, claim, these are all parts of the process that can be relatively easy or very difficult, with big issues if you get it wrong. But what you are suggesting is still a form of advice, not just undirected information. Even DIY websites like Lifebroker require a financial services license.

  • tonka on 30/06/2022 - 08:54

    Lots of people have it as part of their super plan already but don't know.
    The plans available through super can be cheaper, with the advantage of fees coming out of your super accumulation so you can easily retain the insurance if times are tight. If you don't wantt your super balance reduced can salary sacrifice a bit to cover it and you get the advantage of an immediate tax deduction.
    Cover is usually 2years at 75% of wages after you've been off 2 months.

    • coffeeinmyveins on 30/06/2022 - 09:11
      +1

      Lots of people have it as part of their super plan already but don't know.

      Those policies are pretty rubbish though

      • tonka on 01/07/2022 - 00:48

        75% for 2 years, is what it is, for temporary disablement cover. After 2 years possibly looking at the permanent disablement cover where in a lot of cases you can select the level of cover you require.
        My point of people not being aware, is they don't make the claim when needed as they don't know they have it.

  • isthisreallife22 on 30/06/2022 - 09:46

    Barefoot investor talks about this https://www.barefootinvestor.com/insurance#life

    • isthisreallife22 on 30/06/2022 - 09:47

      I need to sort this. A colleague of mine suddenly passed away this week (and I mean SUDDENLY) in his early 40s - really brings it home

  • JimB on 30/06/2022 - 09:59
    -1

    Whatever life insurance you get, make sure you get a policy with a Level Premium structure.

    Before anyone ask, you can't get Level Premium Income Protection within Super anymore.

    • mrtin on 01/07/2022 - 23:19

      Careful with these comments as it doesn't always work out better.

      • JimB on 02/07/2022 - 09:26
        -1

        Ok will revise my statement.

        99% of people will be better off with a level premium structure if they wish to keep their Insurance policy for the long term.

        • mrtin on 02/07/2022 - 10:17
          +1

          Level premiums have gone up over the past few years. Can't speak for all, but many have seen increases of 50 to 75% on level premiums.
          Need to also consider stepped for someone young. Stepped seems significantly lower than level. Maybe they can move to level later? Also you're basically getting yourself married to the insurer. They can increase the premium, then what are you going to do? Move? They may not improve policy definitions over time compared to other insurers. Stay or move? Move insurers and go level again and reset?
          It's important to talk through this and go in with an open mind. I'd say talking to an expert in this area is beneficial. Sorry it was late when I replied last night hence the limited details.
          It could also take years like over 10 years to just equal a stepped premium. And even more years to break even. Get advice so you can make an informed decision. Ozfinancialservices may provide superficial "advice".

          • JimB on 02/07/2022 - 12:29
            -1

            @mrtin: Very few level premiums increase by that. I know AMP increased by a lot following the sale of AMP life insurance.

            Most years are nil increases.

            I’ve seen it with my own clients premiums each renewal (TAL (Asteron), AIA (Comminsure) Zurich (OnePath), MLC).

            17 years ago I sold quite only Stepped premium policies, after a while, I saw the massive increases in premiums and a few years later I recommended Level premiums where the client can afford it.

            Personally have Level premiums purchased about 12 years ago. It was more expensive than Stepped but now is much cheaper.

            • mrtin on 02/07/2022 - 17:08
              +1

              @JimB: It would be good to have more certainty with level, but I don't trust them at all especially given regulatory climate.
              I believe flexibility of policy and cover is important.
              Level ip wasn't as bad prior to changes but now imagine taking out level and then you get negatively reunderwritten. I'm just not convinced level is good for nearly 100% of the time especially given current uncertainty in the sector. Each to their own. Get advice and talk through options. Always an interesting discussion about these topics amongst peers.

  • JIMB0 on 01/07/2022 - 08:19

    I had it once through an employer. I made one claim in that time which payed out far less than was ever paid in premiums. Some older people with health issues did rather well out of it.

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