Income Protection Insurance - worthwhile or not?

Shonnie

Shonnie

Hi guys,

I went into the bank today to sign off on my new mortgage docs - and the branch manager sent me into another room to discuss some insurance stuff.

I'm not sure if it's worthwhile or not? I'm only 22 - and it costs about $30 a month - its 100% tax deductible so it should only cost me about $20 a month after I claim it back..

It covers 75% of my income until I'm 65 in case I get sick or injured or am unable to work..

Do I get it? I'm not sure! I thought I'd find out what other people are doing too -

And I kind of think about that law of attraction thing - like if I get insurance coz I think i'll get sick then I probably WILL get sick.. Hehehe

Let me know what you think! Thanks!
 
I am in a similar position but comtemplating TPD, Death & Income protection. Quotes have been in the range annually of $2.5k.

After having built up a small portfolio and almost maximising my serviceability, I am simply looking at extending risk management on a broader scale. If something was to happen to me, I don't want to leave a huge burden to my family (which it would be). It would be irresponsible of me to not cover for this possibility, however remote.

If you believe in law of attraction, then chances are you won't get sick :)
 
Hi Shonnie,

I have income protection insurance and just renewed it. It costs me about $1200 per year, but I see that as cheap for covering my salaried income to about 65% in the event of prolonged unemployment due to an unforseen event. I also have D&PD insurance but they're lump sum and I like the concept of having all the bases covered. It may not be for everyone, but at the moment my salary forms a large part of my servicability equation so having to do without it would bring my current investment portfolio crashing down and require disposal of some of the assets. I want to avoid that eventuality so insure against it for only $1200pa.

Cheers,
Michael.
 
Hi Michael:

I would like to know if income protection insurance only protect us in the event where we cannot work due to workplace injury? We can't get protection if we get sacked or retrenched right? If that's the case, then it's not going to protect us from economic downturn, as retrenchment becomes a common theme when going gets tough.
 
feihong said:
Hi Michael:

I would like to know if income protection insurance only protect us in the event where we cannot work due to workplace injury? We can't get protection if we get sacked or retrenched right? If that's the case, then it's not going to protect us from economic downturn, as retrenchment becomes a common theme when going gets tough.
Click to expand...
Quite right.

I asked that question of my insurance broker and got told it doesn't insure you against a lack of employment due to prolonged retrenchment for example. It has to be linked to an incident in some way. I believe these to be physical in nature, but not sure. But, for example, it does cover you for things like cronic fatigue syndrome. Mine has a 3 month period before it kicks in which reduces my excess as well as it being for only 65% of my current salary.

Still, its a small cost, and it does help future proof my strategy that little bit more.

Cheers,
Michael.
 
feihong said:
I would like to know if income protection insurance only protect us in the event where we cannot work due to workplace injury?
Click to expand...

Generally for workplace injury, it will be in the realm of Workcover. Income Protection Insurance however may top up and/or extend the level of cover.

Workcover does not hoewever cover for injuries sustained outside of work, and this is where income protection becomes important.

Check with the policy providers (the salespeople will be surprised you actually want to talk with them) on cover for retrenchments - I believe there are some limited cover around.

Cheers,

The Y-man
 
Definately get it, however I would check with your superannuation funds insurance policy first. They are more likely less than half the cost.
 
twobobsworth said:
Definately get it, however I would check with your superannuation funds insurance policy first. They are more likely less than half the cost.
Click to expand...

I have checked my super policy over and over again, and the catch is.. it's only payable up to 2 years from the date the insurance is being claimed, and in that sense it's not really a good deal. However, death/TPD cover is definitely better within super, so I'll just increase the unit as my age increases.
 
I know a lady who has chronic fatigue and has not worked for over 12 years. Luckily she had the rolls royce of policies (it was her industry so she bought the best).

To me, it is a no brainer. If you require your income to service your commitments, you need to insure.

Wylie
 
G'Day

A customer of mine recently called to say that the breadwinner had become very ill with a chronic disease, had been hospitalised and they had had to sell the house.

Not only that, but he had also paid his parents' mortgage, and now they, too, have to sell.

He had not earned a high income, they had done the usual after buying the house - bought a new lounge suite, done a bit of work on the garden - nothing flash but no monetary reserves either. Income insurance, even for just a couple of years, would have meant keeping not just one, but two family homes.

Worth thinking about - if the house burned down, if you got knocked down by a bus (or, as with a friend of mine, by an unknown child on a pushbike - my friend suffered a broken pelvis, no-one to sue, no compensation, but hasn't worked for nearly two years since the incident) - so why not insure your greatest asset ..... YOU!!!

Cheers

Kristine
 
wish-ga said:
I tried to get it and was knocked back. Can't tell you how that made me feel.

Ya try 'n do the right thing...... *shakes head*
Click to expand...

This post reminded me of something: get your insurance in place BEFORE you develop any long term issues (eg diabetes, heart conditions, high blood pressure etc).

Once you are diagnosed with these, you will either be rejected or at best suffer 100%-150% loading on your premium, along with exclusions for sickness caused by pre-existing medical conditions.

Cheers,

The Y-man
 
Having never had income insurance I am shooting from the hip --- but I was under the impression that the income covered was the net income or taxed income.

In other words if you earned a $1000 per week tax $300 then they would only cover you for the $700.

All good, until we have negative cash flow due to property ownership. Now we have $1000 per week less $400 in -ve gearing and still $150 in tax thus we have only $450 covered by the insurance.

The problem is that you can't now pay the bills for the IP's and they wuld then still be at risk.

Anyway that is my understanding possibly things have changed and you can now have a 'agree' cover.

I don't know but I am sure someone here will:D

Cheers
 
Our breadwinner has Income Protection Insurance. His salary is curently an important part of our strategy at the moment, so it makes sense to us to insure it. In our case coverage is at 80% of his salary, for a maximum of two years.

I did read somewhere that only 60% of claims for Income Protection are allowed. The idea was if there was a car accident, for example, and they took your car over the pits and found something, it could be used against you. A bit like car insurance really. I have not been able to find any evidence to support this since looking again.

But as Income Protection Insurance is 100% tax detuctible, ie you get it all back at the end of the year, we can't see how we can go wrong.
 
I've had income protection insurance for a few years now.
In an injury they will only pay me AFTER workcover stops paying.

I also have a 30 day waiting period.
I have kept it because it is paid through my super.

If I had to come up with hard earned cash to pay for it I wouldn't have taken it
because I now have my LOC and I can draw money from there should something go wrong.

Cheers
 
Last edited:
Tulip said:
But as Income Protection Insurance is 100% tax detuctible, ie you get it all back at the end of the year, we can't see how we can go wrong.
Click to expand...

you dont get it all back - just the portion that would be tax. at least thats my understanding.
 
I would definately get it.

Any elective surgery you may want/require you will need time off work. I get 2 weeks sick leave a year so for me to get my shoulder reconstruction I would have to wait nearly 10 years to save up enough sick leave to not loose out on any income (assuming I dont get sick in between)

Gives you piece of mind if you play sport.. you never know what is going to break next:)
 
I'd get life insurance too. Right now I'm covered every which way because I'm in government and it all comes automatically with superannuation. When I retire, I'll be looking closely at my debt/equity levels and obtaining appropriate levels of insurance.

That way if I drop dead, my family, who stand to inherit, will also get a chunk of cash and not just a mountain of debt and a whole lot of stress ...

DJ
 
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