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The problem with the answer "we'll just sell some investments" is that doing so might compromise your ability to fund retirement. The whole reason for investing in the first place is to attain financial security. If you sell them what happens next?

Assuming you maintain the same level of cover over your lifetime, I agree that level premiums are best - but it does "lock you into" the policy for a long time (and the advisors trail commission!). However, for many people, their cover can be safely adjusted down as their financial position...

Some policies won't pay out if you have left your job as an employee and become self employed - so you should check that as you could be paying for something that's worthless. Also, the cost only gets cheaper if you have level premiums (but starts out more costly at the beginning). Stepped...

What you are talking about is ‘self insuring’ and that is often very high risk as it will take quite some time to accumulate a nest egg sufficient enough to cover risks such as being unable to earn an income for a long period (by which time your net worth and risk profile will probably be such...

Good point Leigh. I guess it depends on the Fund's rules. Also, this demonstrates another benefit of fee-for-service planning. Independent advice - not commission lead 'sales' advice.

In most situations IP insurance outside super is better due to a longer benefit period amongst other things. It’s a false economy to put it inside super as you may find out that you'll get a limited benefit if you do claim because some of the benefit might be trapped inside super. That said...

Sure - and if you knock out home & contents, health and car insurance you'd have even a larger surplus. It's all about risk. If you are uninsured, you risk loosing the lot. It's a personal call - so long as you realise the risks involved. For me, there a lot of hard work involved in getting...

We often don't recommend having income protection insurance inside super but acknowledge that it is better for cash flow. Here's an article which has a good summary of why outside super is better: http://www.moneymanagement.com.au/article/Income-protection-inside-or-outside-super/489936.aspx

Due to the rules of many funds. However, you can have a benefit period of longer than 2 years...

No. His policy was on 'own occupation' (dentistry) and the policy didn't have an 'other earning' clause (sometimes insurers can reduce payments if you're receiving other income.

And that's what a good advisor should be pointing out - what a policy does and does not cover. The terms are critical with IP particularly. Some IP can be next to useless. However, a good policy is priceless. A dental client of ours had an accident playing golf - hurt his thumb. He's fine...

Great post Rolf. I couldn't agree more.

I'm pretty sure that you can get a 14 day waiting period (min period). Most people would have enough sick/annual leave and cash to last at least 14 days. If not, IP insurance probably isn't your biggest problem.

All the pints above are valid and interesting. The key thing to ask would be “if you were sick and couldn’t earn an income, how are you going to pay for commitments such as living expenses, mortgages, children’s education expenses and so on?” Rental and investment income might pay for some of...

Did you use a specialist risk insurance advisor? Some of these guys have very strong relationships with underwriters. Often it's just a matter of cost - most insurers will do anything at the right price.

Our of interest, how many people that have over $500k of debt have income protection insurance with a benefit period until age 60 (note that income protection insurance within super normally only has a 2 year benefit period). I'm interested in the answer as, in my opinion, most people that...