Hi, what are your thoughts on income insurance?
I've been using it for years and never had to make a claim. Thinking of cancelling it. Things are pretty stable jobwise, and I really can't afford to keep paying $200+ a month anymore.
That's $2K+ a year I can put towards my mortgage. đź’¸
This is right. Many can claim for depression and anxiety. As long as there are evidence of the conditions being diagnosed.
Yes there are physical claims but mental claims are very much on the rise.
There are a few things that trigger me thinking income protection is a good idea. If you have a mortgage, or kids being the main triggers. An emergency fund is all well and good for the short term, but how many people have 6 months+ savings.
My policy kicks in after 3 months (as I do have plenty of savings to cover more than this time with no income, and this will reduce premiums), and I have it set-up to cover 75% of my salary until I turn 60/65). I've known a few people who have been hit with cancer/other debilitating diseases and are without income for significant time periods and income protection is what has allowed them to keep paying their mortgages/rent and put food on the table.
It's also easier/cheaper to get it when younger as any pre-existing conditions will likely be excluded from cover, so best to sign-up when young and healthy!
Is it through super or outside?
I have my main policy outside of super, but top it up with a smaller policy within super which is quite cheap. I have issues increasing my policies as my income goes up due to pre-existing health conditions.
Insurance is just gambling and the house always wins.
we always have a year or two or living espenses stashed up and the rest outside investing. so never saw the need for this.
Just checked mine. Covered for around 90K a year for two years with 60 days wait. Premium is around $400 a year pre-tax. Professional work rating in my 40s. Via industry super fund. Maybe OP needs to look for a better deal?
for me its always been a no brainer. For example my brother was attacked by some really bad people at a job site (totally innocent, wrong place, wrong time). He was stabbed, glassed and punched within an inch of his life. Physically he recovered, but mentally was just gone and still has night terrors and PTSD. His salary and permanent injury insurance kicked in and he's been living off that for the last 8 years, and probably until he's a pensioner.
One thing that hasn't been mentioned is insurance within super is not specific occupation. If your income is higher and you cannot work in your field you will not get a pay out if you can work other jobs if you don't have occupation specific cover
I have it outside super. The one included in super is normally “if you’re unable to work any job”. My policy is “unable to work in my industry for a job I’m skilled for”, which to me is far more appropriate. Yes there’s a 3 month wait period, but it pays till 65.
Like any other insurance I hope I’ll never use it.
it's interesting I was speaking to an insurance broker who was saying how rare it is to have a claim that pays out beyond 2 years. chances are whatever illness you put a claim in for, it's likely either TPD or life insurance will be triggered before you get to 65 (you either get better or you die).
I do pay a fortune a year for occupation specific cover covering maybe 40% of salary which I figure would cover living costs if I downsize to a smaller house, on a level premium paid to 65 with 3 months wait. you will pay a huge premium for 2 week - 1 month wait which you can cover yourself with savings/sick leave if you have access. IP insurance is very complex and worthwhile doing your research / talking to a broker. I plan to drop it once I pay off the house and in a position financially to basically self insure and survive without any income
chances are whatever illness you put a claim in for, it's likely either TPD or life insurance will be triggered before you get to 65 (you either get better or you die).
It depends - in super, they often have a clause in the policy to say that they'll assess for a TPD benefit payout. But in a standalone policy outside super, if your benefit is to age 65, then that's what it is regardless of whether your condition is permanent or not.
Major insurance companies are actually losing money for the Income Protection cover that they offered hence the high cost of premium and increasing premium.
They were losing a lot of money to the point APRA need to step in and ensure insurer are acting in sustainable way when dealing with IP cover.
FSC
The reason they are still offering IP is their main profit comes from the other main one (Death, Trauma and TPD). They may lose market share, if they dont offer IP but the other big competitors do.
Just like any other insurances, you may feel that you dont need it and the chance of claim is really small, until you actually need them. So this is more about your risk behaviour and acceptance. As other have mentioned if you have sufficient saving, and less dependants, your risk might be lower compared to others. So you are paying premium for those who need them more. But with unexpected events in life, who can guess hey?
Insurance is for pu**ies.
Isn't it an amazing concept that you pay them and what do they do? They pay a team to try and find technicalities so as to avoid paying you out. So you pay them, but they don't really want to serve your best interests.
That $200/month is about as useful as playing the lottery…. you are throwing money down the drain.
Put that $200 contribution in to a compound interest calculator..
Those are my thoughts as well, but some responses here are making me think otherwise. I've only just cancelled my policy before reading these messages. Some here have noted I should speak to a broker or financial adviser. I'm going to find a financial adviser first. I think I really need one now.
I bet you they're raking it in right now with everyone having financial troubles.
You don't need a financial advisor. That's another waste of money.
Post on ausfinance on reddit, it's free and non biased.
Your posts there must be a blast.
What a scam. Imagine if you put $200 aside every month in your own bank account. The thousands you would have saved.
You can make that argument for all insurance. It’s not a good one, but you can make it.
For this type of insurance, it's more than valid.
If you’re in the position were you actually need it, let’s say you have an accident at 37 and can’t work again, and you income protection insurance pays till you’re 65, your telling me saving the premiums will match that over the next 28 years?
@Randolph Duke: In that scenario, how is the monthly insurance payed if you can't work?Surely they still want that out of you.
$200 aside every month for 30 years compounded annually at 5% interest only gets you approx $160k. Injured 30 something year old losing 30 years of work vs saving 160k. Math doesn't add up.
That's what I was thinking as well. We're literally not making any savings right now. We make enough to pay the bills and groceries. But last year, since April, we suddenly have not been making any savings at all. It's such a stark difference.
According to my bank account, it's VERY obvious something happened last year around this time. We have not made any lifestyle changes. We haven't bought any new subscriptions or anything like that.
It's so weird. Like… BANG! April, May 2023… no savings. Offset account stopped growing. It's scary.
Does income protection insurance cover sleeping in for your Centrelink appointment?
Im pretty sure u can get income protection insurance from your super if u opt in for a few bucks a week
As most have mentioned in this thread:
*Income Protection Insurance is not designed to cover involuntary terminations. It is designed to protect your income in case you are unable to work due to a medical condition.
*Setting it up outside of Super gives you 2 benefits - being very specific about your job, lifestyle etc and customising cover duration (up to 65).
I have a desk job but I do recreational scuba diving once a year - I had to specify my certifications and max depths so that IP could adequately cover me. In the scary situation where I cannot continue doing my specific desk job, IP will cover me. I do have to pay a higher premium for these features.
The thought that an accident or serious illness would financially cripple me and my partner kept me up at night - I have another 30 ish years to go before I can retire.
The $1500 ish pre-tax deduction yearly premium was a no brainer. I feel it offers a better peace of mind than a comprehensive car cover.
After reading all this, I think my next step is to see a financial adviser. I cancelled my policy just now without reading all the latest comments here. Feeling a little remorse. I hope nothing happens to me from now until I get my finances sorted.
Good call - speak to your financial advisor or accountant + your partner. Your accountant will be able to tell you how much of that $2k you get back through tax deductions to soften the blow.
Statistically speaking, most people won't ever need it. If a lot of people needed it, this type of product wouldn't exist because it wouldn't be profitable for the companies to offer them
Income protection is not that profitable for most of the insurance companies, they are a loss leader.
As in… they pay out more often for this particular one than other policies?
yes, mostly mental health claims
If you can't afford to fund personally, have it funded through Super.
Have a waiting period of at least 90 days, and if you want, go to 6 months.
Ensure you have a benefit period to age 65.
Your income is your most valuable asset, and you need to protect it.
Statistically, yes, you may not need to claim. However if you do need to claim because you have a lifelong issue, then you could end up homeless.
Insurers pay out over 95% of claims in the first instance, and they lose money on income protection because of the amount of claims there are.
In my line of work, we have 3 people who have been on income protection claims. One who has been on claim for about 15 years for MS, the other 2 for over 3 years for mental health.
Talk to a financial adviser or insurance broker about it.
Funded through super. Interesting. Do you work in insurance by any chance? I probably do need to speak to a financial adviser. I'm not a spring chicken anymore. Do they also advise you on insurance?
you lose the tax deductibility and own occupation clauses though, I'd probably rather top up TPD/life through super and have IP outside with 6 months waiting to reduce premium
I have it outside Super. My employer pays for a policy (used to be in Super) that covers me for the initial two years (I think 90 day waiting) so I purchased a top-up policy that kicks in after that and takes me through to retirement so it is less expensive. Also as I have gotten older I have reduced the benefit as my mortgage balance etc has shrunk so the cost remains the same or might have actually reduced plus it is tax deductible.
If you get it through super beware because many/most have "any occupation" clause. I had to source "own occupation" insurance meaning if i injure myself they cant force me to go work at maccas.
Income Insurance???
Open an ING Saving account, focus on savings as much as you can up to 3 months worth of bills and that is all you need.
Also called emergency account if you never read the Barefoot Investment book, you must have up to 3 months worth of savings at least.
You spend $5 monthly with bills and house consumable shopping, you should focus on saving $15k
That is your income insurance available at any time. Any other option will cost you money to have such feature and you might need to wait to receive anything. Totally not worth, do it yourself and be in control.
If 3 months is too much, aim a month first to avoid finance stress, then 2 months, and so.
I've a fairly decent life style, no extravagant, no parties and sh1t, no burning money with useless stuff.
I've 3 months worth of monthly billing saved and I'm aiming 6 months now.
I've lost my job last year due to redundancy, not having finance stress is a must.
Not saying I use this or reccomend it myself, but the barefoot investor recommends income protection as he considers it the most powerful asset https://www.barefootinvestor.com/insurance
I hear you but the problem with that is the fact that A) it's a paid feature no matter who is the provider and B) it isn't an option available when you need it, you must go throw the entire process before you can receive a cent.
If you are under finance stress, time is the least thing you have, I prefer the emergency account approach the book mention because you are in control of it at all time. ING Saving has a sweet return.
I get it, it's a bank which has its own risks so why you should avoid non-trustworthy banks.
do you have living expenses until you reach 65 saved up in your ING account? your broker will be the one to put in the claim, you shouldn't have to spend any time chasing it
@May4th: Broker??
We aren't talking about stock market share.
Living expenses until you reach 65??
Who doesn't, unless you don't pay for food and basic bills like everybody else does.
@ratoloko: yes, that's the point, if you are paralysed tomorrow and can't work do you have enough income to keep your family fed and bills paid till pension age?
brokers are commonly used for income protection/insurances same as mortgages, you should talk to one if unsure what to go for
As a contractor I held income protection insurance for 13 years. Then I fell ill and couldn't work for 9 weeks. My wait period was 8 weeks.
I started to claim but it was too much hassle for 75% of a week's pay.
Since then I ditched it. I think I have a lesser, cheap policy in my super.
Sorry to hear that.
It's exactly my point, until you can receive a cent, you sure will have a wild ride.
Not worth it.
So you didn't need it, which is great. Personally I'd have even longer, ie. 6 months wait period. most people have 3-6 or even 24-36 months buffer, you will be paying a much higher premium with shorter waiting periods. I have it only for most catastrophic circumstances where I may be out of work for years or more. The other insurance you can buy is trauma insurance, which gives you a pay out on diagnosis of a major condition like cancer or major accident etc which gives you a lump sum, but this is not tax deductible
So you didn't need it, which is great
I don't think you understood it. The user said: "couldn't work for 9 weeks. My wait period was 8 weeks"
It shouldn't have taken a week for god sake, the system will do whatever they can to make things difficult for you.
I think you are the one who misunderstood..it didn't take a week, the payments are backdated from date of illness/incapacity+8 weeks, the poster merely said it wasn't worth the hassle to claim only one week's payout so they gave up.
you are the one who is in control of whether the waiting period is 1 or 2 weeks or 3-6 months. you will just be paying an arm and leg for a shorter waiting period. you will never come out on top trying to game it as the actuaries have already crunched the numbers, you can't "win" - IP is there to make sure you and your family are taken care of in event of a catastrophic event or illness. the best you can hope for is that you will never have to make a claim.
incorrect. Suffer a mental breakdown and income protection kicks in.