Current Life Insurance / TPD / Income Protection - Getting Ripped Off?

melbourne guy on 23/05/2024 - 18:48

Recent life events and the cost of living has got me thinking more about our current expenses.

Me and my partner have both got Life Insurance, TPD & Income Protection outside of our super fund, through TAL, currently paid for with a mixture of rollover from our super and from our savings account.

When we signed up through a broker in 2017, the cost of my policy as a 27 year old was $1907 per year but now as a 34 year old the same policy is now costing $4338 per year.

Just wanting to know if this is in line with what is expected from a policy like this and whether it's worth getting reviewed with a financial advisor? Happy to provide more information if it leads to better answers but I'm just mainly want to know if my situation is so far out of step that I'm getting properly ripped off? Thanks.

Financial Insurance Life Insurance

Comments

  • Muzeeb on 23/05/2024 - 18:53

    My internal pub test is telling me it seems expensive but I have knowledge of what the going rate is.

    • May4th on 23/05/2024 - 21:40
      -1

      that's a bit of a meaningless comment. how did you come to that conclusion without knowing what split of life/tpd/IP, how much is covered, whether there's any own occupation cover, what the waiting period is and whether it's paid for 2 years or to 60/65/70?

  • brendanm on 23/05/2024 - 18:54

    now as a 34 year old the same policy is now costing $4338 per year.

    Good lord, is this for $20m life insurance, and $50k per month income protection?

    • star-ggg on 23/05/2024 - 22:36

      Irony would be OP and partner were in the same car when they meet their demise

  • boomramada on 23/05/2024 - 18:58

    Isnt Life Insurance /Income Protection comes with the super ?

    • melbourne guy on 23/05/2024 - 19:10

      By default it comes with super funds but you can get it customised and that's what my broker did in 2017 in combination with new super funds and getting my first home loan.

      • boomramada on 23/05/2024 - 19:28

        I would only customise it, if im a sole trader/tradie. That's just me.

    • sumyungguy on 23/05/2024 - 20:50

      Since 2020, one of the outcomes of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was that members of choice super products and MySuper funds are no longer be provided with automatic death and disability insurance if their account balance is under $6K or they are a new member under age 25. A member’s automatic death and disability insurance now ceases if their account is inactive (does not receive a contribution for more than 16 months).

  • barge-in hunter on 23/05/2024 - 19:02
    +1

    Income protection insurance can get super expensive if you nominate a shorter than normal wait period. Might be worth double checking what your ipp covers first, as that’s a huge factor in the price

  • melbourne guy on 23/05/2024 - 19:09

    I've just taken a deeper look at my documents and it's the income protection which is taking up the biggest chunk of my premium. For the current 03/24 to 03/25 period, the income protection is/will cost me $3740, with the life insurance costing $497, TPD costing $996 and critical illness cover costing $183.

    It's becoming clear where the issue lies with my current policy, as income protection surely shouldn't cost that. Thinking it may be worth ditching that component of my policy. Also these are all meant to be level premiums until Age 65 so that also gets me confused with why the costs are rising so much when it's meant to be levelled.

    If I proceed with that, i'll also look to pay the policy with my credit card instead of super rollover.

    • soan papdi on 23/05/2024 - 20:46

      At least hopefully you're claiming income protection in your returns.

      • sumyungguy on 23/05/2024 - 21:03
        +2

        However you can't claim a tax deduction if the policy is through your superannuation fund and the premiums are deducted from your contributions

    • sumyungguy on 23/05/2024 - 21:01

      The things worth checking in your PDS is how long the TSC (income protection) pays out. Some only pay for 2 years, others to age 65. Payment may be perhaps 75–80% of what you're earning on the date of your claim. I always found TSC (IP) and TPD premiums inside super to be competitive but I purchased term life outside to get the level of cover I desired.

    • May4th on 23/05/2024 - 21:44
      +5

      I think you need to have a good think about what contingency the insurances are covering for, instead of buying insurance for the sake of it. do you have kids? how flexible is your employment? can you not work for 2 years and survive? do you have children you need to look after if you can't work again. those are the questions you should be asking and then tailor your coverage around it using a mix of life/TPD/trauma/IP.

      IP is the only insurance out of those 4 that is tax deductible, if it's too costly you can look at increasing the waiting period up to 6 months. you also shouldn't have IP inside super because of 1) tax deductibility 2) withdrawal rules within super/tax 3) cannot cover specific occupation

      if you took up level cover 7 years ago there is no way you will ever get this price again with any other provider so think carefully before you cancel your policy as the insurer will be rubbing their hands in glee

    • StonedWizard on 23/05/2024 - 22:51
      +1

      @melbourne guy - Speak to your broker, this is what they're being paid for.

      Level premium is meant to be more cost effective over the longer period, but short term will cost you more.

      You should consider looking at increasing the waiting period before cancelling your policy.

      Paying via Super rollover is generally the cheapest option. But TAL normally give you a discount if you pay via an annual amount instead of as monthly.

      There's also tax implications if you're paying via super contributions instead of via credit card.

      This is why it's important to speak with your adviser before making decisions.

      Alternatively, look at switching your cover through a Superfund, your adviser can help you with this.

    • benwaffle on 24/05/2024 - 01:48
      +4

      Insurers were losing a lot of money with claims especially for mental health so they threatened to leave the insurance market in Australia unless APRA approved some changes to personal insurances which allowed them to stay profitable.
      APRA agreed in 2020 and they stopped selling IP policies with agreed values paid out to age 65. Insurers also raised their base premiums quite substantially (which they are allowed to do in their PDS) meaning people on level premiums have had large cost increases (some over 100% annually).

      Insurers want to make those on the grandfathered policies switch to the newer policies which need to be re-underwritten every 5 years because it is expensive to pay out people to age 65. In the end you have to work out if you have enough passive income to offset getting injured and being off for a period of time or if you have to suck it up and keep paying for the IP

      • hoey888 on 24/05/2024 - 13:21

        31 March 2020 Income Protection Change

        Just be aware of the 31 March 2020 changes. Sounds like you may have the legacy 'agreed' amount insurance cover. Seek advice to understand differences before making changes/cancelling policy.

        *Agreed policies are no longer offered by insurers. Your policy sounds like would been pre underwritten at application. Newer policies are generally underwritten at claim time and require evidence of the last 12 months income of which they only pay XX%. Too bad if you reduced income due to health or personal reasons.

  • Shoocat on 23/05/2024 - 19:35

    What super fund are you with?

    • melbourne guy on 23/05/2024 - 19:36

      FirstChoice Wholesale Personal Super from Colonial First State

      • Shoocat on 24/05/2024 - 07:33

        You could consider moving funds, and at the same time looking at their insurance offerings? You might get a lower insurance premium and better performance for your super.

  • Pikaloo on 23/05/2024 - 19:55
    +2

    How do we know if you're getting ripped off if we don't know what your policy says? That's like asking am I getting ripped off I'm paying $20,000 in car insurance a year? meanwhile you're driving Koenigsegg.

    • melbourne guy on 23/05/2024 - 20:00

      I only stated the basics to begin with so I only need to post additional information if asked/needed. The main advice I was seeking was if a 127% premium increase over 7 years was the norm and it appears I've now found the source of my problem and what action I need to take.

      • May4th on 23/05/2024 - 21:42

        there was a big increase in IP premium about 3-4 years back as the industry was losing money..127% sounds about right

  • AndyC1 on 23/05/2024 - 20:01
    +2

    What did your main super company quote when you asked for a comparison in order to compare your current costs?

  • Meho2026 on 23/05/2024 - 20:22
    +1

    Compare the cost of buying it inside your super fund.
    To lower the premium, adjust the waiting period of income protection, according to your accumulated sick leave in your job and drop the % of your salary covered to the minumum you need to cover all expenses.
    Your life insurance payments will go up and the payout less as you get older, if you have assets that have grown maybe you can lower the amount of life cover.

  • Buwwy on 23/05/2024 - 20:27
    +2

    Lots and lots of variables. Best to seek professional advice.
    3.7k for income protection is not unheard of. But for levelled premiums to rise is odd. From memory, insurance companies changed a lot of clauses a few years ago so you may find that your current policy is still better than other policies out there.

  • MelbEng on 23/05/2024 - 21:12
    +3

    I strongly recommend you go back and see a financial advisor to get all of those insurances sorted out. Insurance is not set and forget and as you have seen, can change a lot in 7 years.

  • onetwothreefour on 24/05/2024 - 07:07

    and whether it's worth getting reviewed

    You don't review your insurance every year?

  • spal on 24/05/2024 - 08:50

    Just be careful in reviewing the policy. Sometimes the FA will .cancel the current policy and start a new policy, as it was beneficial to them. It may not happen now being fee for service. If you cancel the current policy to start a new policy, then you will be loosing benefits of starting a level premium policy at an early age. You should be able to review your needs and change the level of cover, waiting period, pay out period, etc. to reduce the upfront premium costs. Also, annual premium payment may get you a discount too.

  • Fredfloresjr on 24/05/2024 - 09:31
    -1

    Who's the sole beneficiary? Surely he's be getting minimum $25M with that rate.

  • netjock on 24/05/2024 - 13:24
    +1

    the cost of my policy as a 27 year old was $1907 per year but now as a 34 year old the same policy is now costing $4338 per year.

    You need to look at all the documents. I could be their assumptions around what your income is going to be. Remember that peak income earnings is around 35yo.
    It might pay to check what the life insurance and TPD looks in inside a super fund like Australian Super. They get cheaper rates if you fit the standard description.

    Depending on your circumstances income protection maybe tax deductible. Little help there.

    Best of luck.

  • ladybird1 on 24/05/2024 - 13:56
    +1

    IP insurance tends to be expensive. Depending on how much converage per month, your premium is not crazy. But it should be outside super, so that you can tax deduct it. If you are in a high tax bracket, this makes the real cost quite a bit less. If you have dependants (or are planning to), it's probably a good idea to keep it.

    Life insurance is inexpensive.

    TPD is maybe not needed. The Life insurance will pay out if you die. The IP insurance will pay out if you are too sick/injured to work.

    The insurers all repriced all their policies in recent years, such that even level premiums went up. For everyone. They should (theoretically) now be level again.

    Note that if you have indexation turned on, even "level" premiums are not truly level. The yearly increase in the amount you are covered for (to account for CPI increases) will be priced based on your age that year, and not on your age at the time you originally set up the policy. Over several years, these CPI increases can add up.

    If you took out level premiums at age 27, your currently policy might be the best deal you are going to get.

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