Income protection insurance

Do you have income protection insurance?

  • Yes, benefit until age 60 (policy held in personal name)

    Votes: 68 36.8%
  • Yes, 2 year benefit (i.e. policy held in super fund)

    Votes: 27 14.6%
  • No

    Votes: 90 48.6%

  • Total voters
    185
I thought it was all now called "Personal Leave" and is cumulative (what you don't use rolls into the next year)?

i.e. Personal Leave now encompasses

Sick Leave taken by an employee because of a personal illness or injury, of the employee or

Carer’s Leave taken by an employee to provide care or support to a member of the employee’s immediate family due to personal illness or injury of the family member or in an emergency situation.

That's correct. Some modern awards even allow 'cashing out' of personal leave & it's up to the enterprise to determine whether they want to do this. V. dangerous for the employees, IMO, as it sounds like a good idea when you think you never get sick. Then an unexpected illness or injury strikes & you're off work for 10 weeks & you're accumulated sick leave is gone.
 
Check the policy thoroughly. Most only pay a % of your wage.
Most only kick in after all other entitlements have been used/exhausted. This includes work related entitlements. So if you do the injury at work then work pays no insurance claim as well. The longer waiting period the cheaper it is and the older the policy is the better protected you are. The latest ones are not worth it in my book.
Work out the yearly cost then buy some blue chip shares to that value. Buy out right,re invest divs and repeat it every year put them in a draw and forget them.
About to dump our policy and do as above. Should coulda woulda years ago:(
cheers
 
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 that you don’t need insurance anymore anyway).

Your comments about the ‘latest policy’ is also incorrect. Like an insurance policies, they vary and you need to check the terms. There are some excellent policies and some crappy ones... just was flood victims are finding out. Some things to watch out for:

– Agreed value versus indemnity polices
– Any occupation versus own occupation
– Index linked premiums
– Non-cancellable policy
– Offset clauses
– Day one accident option


Industry super funds offer some good insurance products at a very low cost. They are rarely perfect by themselves (i.e. often you need top up cover outside super but that’s often at a low levels so is also cost effective).

There’s really no excuse for not having some level of cover and property investors need it more than the average. I suspected most don’t have it and that’s why I started this thread (to see if my thought was correct). If you never need it, insurance is a waste (apart from the sleep at night factor). However, on the off chance you need to use it, it might save your life, marriage, children’s welfare and so on. Just be sensible and realistic about your risks and capacity to be able to live without income.
 
I took out a policy about 3 years ago when my income peaked (just prior to GFC) as I was worried what would happen if I got sick and anything changed and I was unable to continue earning the same. Because the mortgage was pretty heavy at the time also and I was contracting to sustain the high income.

I was able to secure the policy to match my stated earnings and they will pay me 70% of that income, which is still a pretty decent income. Now that property has become an IP so looks after itself anyway and I earn much less because I'm building a business. But I just keep paying the $114 every month and the policy (which cashflow positive from the IP covers anyway) and its some good peace of mind of anything happened as I get older. Only 31 at the moment though. But my understanding was also that by taking it out at a younger age like I did, means it will be heaps cheaper once I get older, because I already had the policy. But if you are already old and you go in to take out a new policy, you will be charged heaps more because you're seen as higher risk.

Had to get a medical test/check thing done for the policy too, which was all clear I am healthy so no worries.

But does give me good peace of mind that I am now insured for more than I currently earn because its a "stated value" policy and they agreed to that. They said even if my income drops in future years, it will still be agreed to that specific income amount. Nice one.

Not cheap though really at $114/month. But I just look at it as peace of mind.
 
I took out a policy about 3 years ago when my income peaked (just prior to GFC) as I was worried what would happen if I got sick and anything changed and I was unable to continue earning the same. Because the mortgage was pretty heavy at the time also and I was contracting to sustain the high income.

I was able to secure the policy to match my stated earnings and they will pay me 70% of that income, which is still a pretty decent income. Now that property has become an IP so looks after itself anyway and I earn much less because I'm building a business. But I just keep paying the $114 every month and the policy (which cashflow positive from the IP covers anyway) and its some good peace of mind of anything happened as I get older. Only 31 at the moment though. But my understanding was also that by taking it out at a younger age like I did, means it will be heaps cheaper once I get older, because I already had the policy. But if you are already old and you go in to take out a new policy, you will be charged heaps more because you're seen as higher risk.

Had to get a medical test/check thing done for the policy too, which was all clear I am healthy so no worries.

But does give me good peace of mind that I am now insured for more than I currently earn because its a "stated value" policy and they agreed to that. They said even if my income drops in future years, it will still be agreed to that specific income amount. Nice one.

Not cheap though really at $114/month. But I just look at it as peace of mind.

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 premiums are often better becuase most people adjust the level of cover down over time as their financial position strengthens.
 
With stepped by the time you hit say 55 the premium can be that excessive that you end up cancelling it. Then you're in prime category to find somethings wrong with you and youre uninsured and stuffed.

If it were level from the outset the premium doesnt increase over time so this aspect is eliminated.

So if you're the consumer and get two sets of premium quotes, normally you'll take the cheaper - being the stepped - as people are inherently cheap. And it can be easier for the advisor to sell, where long term the level ends up being more cost effective and you dont end up decreasing or winding it up early.

Case by case.
 
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 strengthens - so stepped premiums become more attractive. If you invest well, a time will come where you don't need much/any insurance anymore.
 
I just got a quote from an insurance broker and they recommended Macquarie Life..They say they use a program called X-Plan and this spat out Macquarie as the best policy for Us....

Anyone with Macquarie Life or more specifically have made a claim through them? What were your experiences?

For some reason the Broker told Me most of their Insurers don't insure 'developers' as their income varies so much from year to year...but that to Me doesn't really make sense because any self employed persons' income would vary just as much also as you can't gaurantee how much work you'll be getting each year. So the Broker was saying they put us forward when making enquiries with the Insurers as 'project managers'. Sounds a bit strange to Me?? Anyone have any thoughts on this?

PS. I tried getting a quote from traderisk (someone mentioned them earlier) but they were too snowed under to provide any quotes so passed on our details to Insurance works who is doing the quotation....

PPS. We were quoted $4.21/mth per $100K life cover through Macquarie...this seems very affordable...we've got life through real insurance but at $4.21/mth per $100K cover, this works out cheaper than through real insurance...and i've been through the PDS and coudnl't see any real difference.

Any thoughts would be much appreciated!
 
The wife has IPI via her super for cover of about $5000 per month or so. (she is planning on giving up work in less than 2 years anyway so more expensive insurance makes no sense).

I don't have IPI due to me having saved up about 8 months sick leave and 3months LSL over the last 16 odd years.
 
casuals are not covered

I have worked in retail for the last 30 odd years. When I was working permanently or even part time, I could have claimed my IPI. But I recently found out that now I am working as a casual, I could not claim it. So I have cancelled it through my superannuation. It's a bit of a bummer really as I had been paying it for years and could not have been able to claim it.
 
The wife has IPI via her super for cover of about $5000 per month or so. (she is planning on giving up work in less than 2 years anyway so more expensive insurance makes no sense).

I don't have IPI due to me having saved up about 8 months sick leave and 3months LSL over the last 16 odd years.

And what happens if you end up with a disability/illness and cannot work for longer than the total 11 months paid leave you have owing to you?

Say you're 40 now, IP insurance will provide you with a salary for the next 25 years. A hundred odd bucks a month for a policy (that is also tax deductible) is cheap peace of mind in my opinion.
 
And what happens if you end up with a disability/illness and cannot work for longer than the total 11 months paid leave you have owing to you?

Say you're 40 now, IP insurance will provide you with a salary for the next 25 years. A hundred odd bucks a month for a policy (that is also tax deductible) is cheap peace of mind in my opinion.

My super fund covers me for Death and Total and Permanant Disability, plus my 11 months paid leave should be plenty of income and time to reassess our portfolio and decide whether or not to sell anything. Plus we would have Sarah's salary.

To put our financial situation into some context Sarah and I are DINKs and are not going to have children, have no non investment debt, low living expenses and our investment portfolio is only slightly negative cash flow, and our debt gearing level is modest compared to our net wealth.

If our situation was not so secure I would definitely obtain IPI.

BTW I'm actually 36 (well almost 37) but good guess. :)
 
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And if you both are in the same car accident and are injured to the point you both cannot work (at least not at the income levels you may have become accustomed to)?

Worst case scenario, but isn't that what insurance is for?
 
And if you both are in the same car accident and are injured to the point you both cannot work (at least not at the income levels you may have become accustomed to)?

Worst case scenario, but isn't that what insurance is for?

No big deal. Sell a property. Maybe sell some shares. Defer an overseas holiday etc etc.
 
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?
 
It turns out its a mute point anyway. I don't qualify for decent IPI. You guys got me thinking that it wouldn't hurt to get a few quotes so I did. Because I'm a cop who (shock horror) carries a firearm on duty and works the means streets only 1 insurance company will touch me for IPI. Even then they can only offer me IPI for a maximum of 5 years of payments and for that charge me the princely some of $178 per month (with 90 day waiting period) or $218 per month (with 30 day waiting period).

Does anyone else have dramas re IPI ddue to perceived risky occupations?
 
Few years back I had trouble getting ipi due to flying in private jets as part of my job. They seem to have relaxed a bit now.
My wife earns about 1/3 of what I do so for this reason I have income protection insurance starting after 6 months(I have almost a year of sick leave) plus enough death insurance to cover the bulk of our loans. She will be fine and I can survive also without the need to cover her. Although she does have some insurance with her super.
 
Few years back I had trouble getting ipi due to flying in private jets as part of my job. They seem to have relaxed a bit now.
My wife earns about 1/3 of what I do so for this reason I have income protection insurance starting after 6 months(I have almost a year of sick leave) plus enough death insurance to cover the bulk of our loans. She will be fine and I can survive also without the need to cover her. Although she does have some insurance with her super.

I'm in a similar boat and I was hoping they could atleast offer me a 6 or even 12 month wait to reduce premiums due to me having sick leave and LSL of almost 12 months and death and TPD insurance, but according to the broker they could only offer a 90 day wait. Which company did you get your IPI through?
 
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