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’¸
purchased in preference to private health
Sure, if you're happy to wait for years and years for elective surgery and like paying more income tax…
Was never my personal position though I'm reconsidering as I currently live on a salary continuance payments (long story). A person with no chronic health conditions is (arguably) adequately covered by Medicare and the public hospital system. But if they suffer a life-changing event that impacts their ability to work their only fallback is Centrelink payments, not enough to service any debts or comfortably cover rent payments. So which is the better spend?
Lots of if's. This is exactly what insurance companies want. Preying on our insecurities. Can I put that savings to use somewhere else?
@BadGiraffe: I had income protection for years, got rid of it, at my work I am lucky enough to have accumulated about 8 months of sick leave, hopefully this will be enough for any issues.
Also if I were to drop dead, my super balance now has enough to clear any debts and leave a nice nest egg for the family.
I am 53 years old and close to retiring, if that makes a difference.
A person with no chronic health conditions is (arguably) adequately covered by Medicare and the public hospital system
Perhaps… if you can look into the future…
Maybe have a look at the length of waiting lists in the public hospitals and then roll the dice…
A person with no chronic health conditions is (arguably) adequately covered by Medicare and the public hospital system.
As soon as something is deemed non-urgent you will be waiting in the public system, sometimes for a long time.
This will suck a lot when you are waiting for a year with some ailment that could be fixed very quickly and cheaply, literally tomorrow or the next day, if done privately.
As soon as something is deemed non-urgent you will be waiting in the public system, sometimes for a long time.
Even if it is life threatening if you can't afford private you might also be waiting longer. Could be the difference between getting a PET scan within a week as opposed to 3 or 4 weeks to confirm if you have cancer. In those situations there is a number of appointments you have to cycle through and the public system is always that little bit longer unless you are lucky. It could be the difference between a month to get fully diagnosed and on treatment and 2 or 3 months to get to the same starting point with treatment. I'd know what I'd prefer.
@May4th: Not if you actually need it. Our health systems helps you get it cheaply.
But yes, if you demand to have a PET scan for something that probably doesn't require it, you'll be charged full freight or be waiting a very long time.
Nope. Separate to super. But good point. I don't know if my super does any insurance. I'll check it out.
Oh your super most certainly does insurance. It's a huge profit centre because hardly anyone understands their statements. In some cases the cover inside super is reasonably competitive.
lol to" hardly anyone understands their statements" this is so true… AustralianSuper charges a lot of "investmement fees" and they brazenly state on the front page of their annual report that they don't have to include these fees in the front page summary and you have to go to later section to find out…. if a bank does the same, it will be prosecuted to the hell…not sure why super can be different
@mountaineer: i think all supers do this?
When they display the returns, its actually real returns minus investment fees, some super options, the investment fees as high as 1%!
Super income protection is usually way cheaper. Ring your super next week or login to their web site and get a quote.
Usually Temporary or Total Disability or something like that. Will pay 75% of your net for up to 2 years. I've used it, saved my arse when I couldn't work.
My basic IP(75% for 2yrs)/death/TPD in super cost me <$20/mth (salary ~150k/yr). I'm underinsured for TPD but really suggest you check your in super options, $200/mth for IP sounds obscene.
Thanks. I will. In fact, I have just ended my policy before reading the latest messages here.
It used to be $100-something, but over the last 5 years or so, it just shot up.
Good question!
Many employer sponsored super schemes include basic temporary disablity insurance which applies after 30 days.
i.e typically after all sick leave and holiday leave has been used (theoretically)
Does OP realise that income protection premiums are tax deductable?
The other big question is…
How much in savings does OP have and what outgoings such as mortgage payments?
In other words, how long can OP survive on savings?
Not for us to judge - only Op can reconcile this.
Right now, honestly, not a whole lot. All money goes into the offset account. I still have a ways to go before I can actually start putting money aside in a high interest savings account.
I assume you have a mortgage in that case.
So income protection is a good investment if you have nothing else to fall back on
What do you earn?
$99K-ish per annum. But things are getting expensive, I have to drop something, and this is something I don't think I'll use. I've got a fairly stable office job. I don't do too many activities that might physically injure me.
Ditch it
What do you reckon about the money I save? Put it into the mortgage, or put it in a high interest account like ING's Savings Maximiser? I'd like it to work for me in the event I really do need the money.
@BadGiraffe: +1 for offset account. You have to pay tax on interest but offset just lets you reduce the amount of interest you get charged.
@Luminary: Yup. My thoughts exactly. Once I pay everything off though, I'm putting any savings into a high interest savings account like ING.
I used to think that too, thought income protection was more for tradies. But you're statistically exposed to cancer, stroke, spinal injury, early dementia, etc. Food for thought…
Have a look at MTB or Major Trauma Benefit as a Stand-Alone policy that is different to Disability Lump Sum or Disability Income Cover.
This is a generic read: https://moneysmart.gov.au/how-life-insurance-works/trauma-in…
Check T&C on when you can access the payout. Some doesn't cover if you get laid off.
So cancel or keep depending on your job risk
This one covers retrenchment, but not if you get fired. Losing my job is low at the moment. Or so I'm told.
Normally this insurance is in your super policy. If you’re worried about money in the future, you should be paying attention to your superfund.
Was considering dropping/significantly reducing our income protection insurance - then we had a huge unforeseen change in circumstances (health). Without it, we would have gone backwards at least 5 years on the mortgage, while also tightening the belt a lot.
Just remember that it's about not being able to work - which can be different to 'just' how secure your job is. Not financial advice, but try sitting down with spreadsheet and roughly guesstimate the financial impact of not having your (or your partner's?) income for 6 months. If you'd comfortably manage, awesome!
…for 6 months; consider including in your modelling having to quit work permanently.
income protection does NOT cover you permanently. 2 years in most cases.
Some policies cover to age 65
@Hasbulla: Like all insurance, we have to assess our appetite for risk. I'm a beneficiary of income protection (salary continuance) from inside super.
financial impact of not having your (or your partner's?) income for 6 months
people should be aiming to have a 3-6 month emergency fund saved up so there is no impact (other than draining your emergency fund)
Putting extra into your home loan as redraw is how we saved a emergency fund. The problem is a lot of people just cant afford to put any money aside, income protection, private health etc a lot of people struggle to put food on the table.
Struggling now a little bit. I took a look recently at our finances. From April or something last year, we're basically breaking even. We're able to pay the mortgage, but not able to grow the offset account by anything meaningful.
Income protection insurance isnt designed for being laid off, its designed for when you have to cease working due to health reasons (or the ultimate health reason ie death). Which can happen at any time of course, whether its a car crash or cancer.
For death perhaps you have a chunk in super or death insurance through super that might cover things; but if you survive and cannot work, what happens to you and your dependents without your income?
If you dont have any dependents or they are older children and will (in theory) be self sufficient reasonably soon, or you have savings or a lot of equity in your home that you could draw down on to cover a short period of no income, then you may be ok
Its insurance. Many people never call on insurance or its only a very minor claim (dented car or break in) rather than a house burning down. However, if your house does burn down then what happens?
I had Income Protection outside of Super.
Roughly $100k, 60 days wait, until 65.
It was expensive and every year got more and more expensive 'with age'.
I got rid of it after I hit my some financial goals.
Like the OP I saw that that money was better placed elsewhere.
That was almost 10 years ago with no claimable event in between. So I have saved $15k at least.
I have set aside that money just in case something happens.
So I have saved $15k at least.
I got almost that much paid in the first month of my claim. My claim went on for 18 months. The premiums saved is nowhere near enough if you get into a shitty situation and can't work long term.
I think the financial goals bit is key - I have it too but while the mortgage is still there won't cancel it - hope to never need to use it of course.
When the mortgage is done and the kids are a bit older I doubt it's worth holding onto - but until then… premiums away
Anyone that's selling you a policy that's until 65 is taking you for a ride.
If something happens to you and you really can't work until 65, that should fall under TPD. TPD is a lot cheaper than an IP policy until age 65, and most people already have that along with life.
I'd consider increasing your TPD cover instead of taking a policy until 65. IP until 65 is really really expensive and only gets more expensive as you get older
Only worthwhile in select situations if you get own occupation cover till 65 depending on your industry
Think of that poor surgeon who got stabbed at the hospital, he may not be able to operate again but can still teach/do academic work with a significant drop in income
I got rid of it years ago as it was pointless and a waste of money for me but your situation will vary.
For me:
1. I have stable amount of savings which can easily cover income loss so not really concerned about it.
2. The restrictions on income insurance is pretty trash. It's usually only up until 2 years, kicks in only after 2 months, and you have to go through a fair few hoops to claim in the first place. I think in most cases I'd be covered by some sort of WorkCover type claim anyway.
If you're on the income insurance that older groups get it may be more worthwhile to keep. The one that covers you to 65 in case of injury - I've had a friend who's been earning $100k for two decades now due to an accident and will continue earning that amount from insurance until 65 without having to work, which is great, but they obviously got rid of this tier because it was too good for the person taking that insurance out.
So for me it was an easy toss, as well as death insurance (I don't have a family or partner, so if I die I'm not worried about my kids being screwed over or whatever).
It's only pointless if you don't claim.
It (generally) locks in a continuous stream of payments of 75% of your income until you hit 65 (which will be the most money you will ever see in your life), the cost of it is tax deductible and you only "lose" out on it if you're "unfortunate" enough to not have something terrible happen to you and the policy payments are 'wasted'
I think it's one of the best insurance products around. If you understand why you insure your car, you should understand why you insure your income.
I don’t think many pay till 65 these days? Who are you with?
I typed "income protection insurance" into Google and looked at a comparison site, I saw a couple that did the 65 years and a couple more that did just the 5 years (I wasn't aware the five year one was a thing)
My original provider was merged with TAL, so by extension I'm with TAL now
plenty policies only cover two years
NobleOak does.
These policies generally only pay ~80% of your income and only for 2 years. Therefore the most you could expect it to pay out is around $160k if you're on $100k a year. Just something to think about.
Payments are often also capped and don't actually cover your lost income, even before the 80% rule.
There's also a 90 day waiting period, which means you should have 3mo buffer even if you have the insurance.
And if you're off work for less than 3 months, you don't get a cent. I missed 6 weeks of work due to injury and just had to wear it.
My wife had to use it due to serious illness and while QSuper did pay out, they didn't do any work on the claim, even to confirm she would get her payments, until that waiting period was almost up. A lot of uncertainty and a long wait when you have regular costs + medical costs to pay. We had to cash in her long service leave to get by.
It depends on the cover, you can go from 14 days to 90 days waiting period.
My cover does till age 60, there's obviously options for a shorter period too. I guess it's obvious, but knowing the T&Cs is very important
Depends.
You paid off your house?
You got enough savings / passive income until you are 65yo?
How close are you to retiring?
Is the policy reflective of what you need? vs what it is trying to sell you
Why 65 though? I see that come up a lot in this thread. What happens after 65? Apologies if it's a dumb question. I need to see a financial adviser ASAP.
The scam with income protection is it pays until you are 65yo (last time I checked) because it is assumed you get on the pension / retire at that time.
Why would you say pay $100 per month for income protection when at 30 you'll get paid for 35 years but at 60 you get paid 5 years.
It is kind of like my insurance went up 30% because someone far away got flooded and I don't even have flood cover.
Depends on your age and dependents. If you are sole income (or majority income) you may need it.
I dumped mine when kids got mid-way through high school & partner started working again.
Just realised there was no need for it at that point.
One weird thing about IPI is that it gets more expensive as you age. That really pissed me off because the amount of years of cover (until 65) were diminishing. I suddenly realised the whole thing was a rip-off and I probably never needed it in the first place
Probably costs more because you are more likely to get sick as you age.
Perfect for schmucks who live week to week…
You mean there are people who can last the full week? Interesting.
I reread Barefoot, he suggests if you are the primary income and you have dependent to you, it's best to insure it via super. He said, "Every day, 18 Australian families lose a working-age parent. Every year, 235 790 working-age parents suffer a serious illness or injury and more than 17 000 of them are forced to stop working, either permanently or for an extended time."
Working age is 18-65 (67 now?) or something like 3/4 of the population.
Only 17000 are forced to stop work permanently or for an extended period each year.
The vast bulk of those will be in the older age group, the numbers of young in that position is comparatively small.
Income protection is not death and permanent disability insurance (that most worked already have via super). This just covers those who are unable to work for a period less than forever.
My opinion on this is quite different to other people.
I generally only insure for catastrophic risks - a home destroyed, a car smash involving the metaphorical Ferrari, travel medical disaster.
In this country, we have a basic level of insurance via taxation - you get Medicare, NDIS, disability and age pensions.
These provide a quality of life that is below what many aspire to, but they are the insurance we all have.
Many of us are also lucky enough to have a spouse or family who would help us if the worst happened. And, of course, we can all save for a rainy day.
In my circumstances, if either me or my spouse could never work again, we would still have a family income able to pay living expenses. This might mean living expenses in a more modest home, and choices removed like sending kids to elite private schools and taking international vacations.
And we have family support, and children who will be able to assist too.
Others are fearful, or cannot bear the idea of compromising on how they live, or the school the kids go to. I know one person with a working spouse and child who insures so that if they died their spouse would never have to work or face a bill for the rest of their life - much closer to a lottery win than insurance against disaster.
And the insurance products routinely have many exclusions, waiting periods and limits. The peace of mind is limited by what they cover.
I don’t ask people who are comforted by this insurance what about the many ups and downs their insurances don’t cover - the child born with a severe medical condition that requires constant care, or the father dying of cancer needing an adult child to be by their side for treatment.
The insurance company knows the vast majority will never make a claim, and they will carefully review any claim you do make. If the product was any other way it couldn’t exist.
So to me, the risks it covers fall into the zone of self insurance. If I had invested income protection insurance premiums since I had my first child, I’d now have over $50,000, and $100k if I had insured the spouse too. I didn’t, of course, instead I improved my lifestyle, had holidays, bought a nicer house etc.
It could all be snatched away (touch wood), and undoubtedly many are pleased a disastrous illness or accident doesn’t mean they have to sell their home or pull the kids out of school.
But you already self insure for a child with a congenital abnormality, or a parent with dementia, so the risks this covers are similar in scale, but limited just to you.
I probably would feel different if I had no family, was a single parent with young kids, and underwater in my mortgage. But I don’t think it is good insurance for most people.
It’s a scam insurance
Like all insurance, it's always a waste of money until you need it.
I'm one of the few here that's made a claim before. I couldn't work for 18 months and I'm glad I had it.
Is yours via super? Thanks
Mine was through my employer. The super one is very similar, except there's another level of approval. In a standalone policy, just the insurer needs to approve the claim. In a super policy, the trustee also needs to approve (but they usually approve after the insurer approves). Just takes a little longer initially, but you can start the claim during the waiting period.
If the payout is the same level and you have a choice, choose one in this order…. employer policy > super policy > standalone policy.
Also remember that income protection is capped at 75%+Super, regardless of the number of policies someone holds.
Thanks for your reply. Appreciate it. This may be the free money I overlooked. During Covid my wife who worked part time got redundant. And she did not even bother to look into claiming her income protection. I didn't have much thot coz I moved jobs. Should have claimed it.
During Covid my wife who worked part time got redundant. And she did not even bother to look into claiming her income protection.
There seems to be a bit of confusion here in this whole thread haha.
Income protection isn't for redundancies - they don't pay out for that. It's for when someone is temporarily partially or fully incapacitated (health-wise) and cannot work.
@bobbified: Ah really? I was told it will cover redundant, etc. Are you sure u didn't mean TPD insurance? I may be misinformed tho.
Thanks
@Bargain-er: Unfortunately, I deal with it every day at work. haha
Are you sure u didn't mean TPD insurance?
TPD is for a Total and Permanent Disability. Income protection is also known as TTD (Total and Temporary Disability).
I was told it will cover redundant, etc
Check your PDS? It could potentially be a 'side benefit' on your policy. If there is cover for involuntary redundancy, it'll be very very limited and only for a very short period. Redundancy cover isn't really a thing here.
Most income insurance especially within super - is junk.
You ought to check the conditions.
For example, most income insurance within super will not pay you if you are able to walk from the bedroom to the shower.
The insane level of disability/injury required to make a claim means >90% of people genuinely unable to work due to disability won't ever be able to claim on those policies.
And the cost of non-junk income insurance is too high to be worthwhile.
You got that stats somewhere? This is such a blantant lie. The disabled type you mentioned are based activities daily living definiton. Majority of insurance in super is based on a much weaker definition (as long as you are unable to work in your own occupation) so many would be qualified for it.
Excuse me for probably a separate topic but does income insurance covers contractors or full time employees only? From what I researched many years ago, no insurance will cover contractors. Thanks
Like all insurances they all seem useless until you need them. My husband fell from a ladder while chopping down a tree with a chainsaw. He was off work for just two years recovering from many badly broken bones. Without income protection we would of been in a really bad position. Thankfully he is back to work now although at a less strenuous job as his strength in his right side, which was the side that took the most damage, is not the same and he still suffers a little pain. He is a very careful man and this was an accident and that is the point, you never know when an accident will happen and it can really throw your finances into a knot if not prepared
I had Income Protection and TPD cover within my super. I accidentally found out about it as it was covered up and not disclosed in their statements they sent out.
About 5 months after turning 50, I had to go on sick leave. It was an obstacle to get approved for IP payments but it eventually happened. The income protection was received for 5 months short of 2 years and I am grateful for having it, though would have preferred to stay in it for the full 2 years covered. They made me TPD cutting off my payments with about a weeks notice and I was entitled to another 7 months cover.
My TPD cover was grossly inadequate. Being unaware of it, I had never set the amount
I wish I had been more proactive. Being one of the older people that I have since learned that the NDIS just automatically reject, I have been stuck paying for my own equipment and items I need. My $80000 is long gone. Of course the 17 years of no salary (ie 50 to 67 if I had continued in the workforce) is a massive loss to our financial situation.
You just need to determine your appetite for risk, and decide whether you'd rather pay an insurance company to take it.
I've always insured properties, vehicles and travel, but worn the risk with health and income.
IMO: Properties are just too expensive to rebuild; too much 3rd party risk with vehicles; and too many unknowns with travel;
Medicare is a great safety net for health, and inome protection insurance seems inadequate to be much use (e.g. limits on how long they pay).
I was once unemployed for 3 years and lived off our offset account. I once paid for eye surgery that medicare wouldn't cover.
I've never done the maths, but presume I'm far ahead.
if you remain well and intend to stay with your current employer for a long time, then bank your sick leave, it is the cheapest form of income protection insurance I know of.
What if your employer decides to let you go? What happens to sick leave then?
It really depends a LOT on your profession as well. For instance my brother does contract work on farms and hence constantly playing with Heavy machinery, chain saws, animals, lots of potential ways to get injured and take a massive income hit so for him it is a must have. I have income insurance through my super but I work in an office and have plenty of savings etc with no debt so if I was trying to cut back I potentially could there with little worry.
If you pay for it outside of super, it’s tax deductible.
Also, people pay a similar amount yearly on car/home insurance, are those things more important?
You have it in your super. Plus any major health issue will be treated in the public system with lost income being the big expense.
Hi, what are your thoughts on income insurance?
Long long time ago but was close to worthless.
Let me explain: in case of unemployment/no_income the insurance would be covering only minimal payments on all your selected credit cards. So the debt will still be there. Kind of help but not much considering how much I did pay.
Don't know if different and better income insurance is now available.
Bit confused, you decide how much you cover, up to 75-90% of your wage depending on policy. Are you saying your entire salary isn't covering your credit carr repayments? It's also not for unemployment, it's for sickness and incapacity
OK, that was far back in the past (as mentioned) and covered "loss of income" in general, of any kind and sort.
For death they were a bit more generous. A bit. Canceling all debts. Irrelevant when young and single.
It was not what you mentioned about insuring a percentage of current income. Obviously yours is/was something better.
Kinda the same logic as car insurance. Its the type of stuff that you dont need until you do.
Insurance is a peace of mind product. You hopefully never need it, but having it can potentially make life a little less stressful. Some insurances are better value than others. I have income protection for 50% of my salary with a 90 day wait. It costs me less than $7 a month through Hostplus super. Seems well and truly worth it to cover potentially life altering situations.
two year? five year cover?
Two.
To me income protection is important to people who have physical jobs. For example, you're a bricklayer and you break your arm playing footy on the weekend. You literally cannot work. Whereas if you were an office worker you still can.
Some people suggest income protection should be purchased in preference to private health. Is your policy inside super?