Income Protection Insurance

[lizzie]

A few other threads have got me thinking.

Hubby works in mining - at a mine that has an expansion approved at government level after 4 years of processes and hundreds of million dollar hoops to jump thru - but is currently block by action in the land and environment court.

If approval isn't granted, the mine only has a working life of 2 years - and around 4,000 people will be out of work.

At mid 50's his chance of re-employment are not great when there are so many younger, equally skilled workers out of a job.

We do have backup plans - and will manage okay if he's out of work in two years - but don't have Income Protection Insurance. Has medical and death thru his super fund and externally.

After something that is unemployment/redundancy based - not medical. Can you even get one that covers redundancy as all documentation implies medical only?

Any suggestions?

 

[Brady]

A few other threads have got me thinking.

Hubby works in mining - at a mine that has an expansion approved at government level after 4 years of processes and hundreds of million dollar hoops to jump thru - but is currently block by action in the land and environment court.

If approval isn't granted, the mine only has a working life of 2 years - and around 4,000 people will be out of work.

At mid 50's his chance of re-employment are not great when there are so many younger, equally skilled workers out of a job.

We do have backup plans - and will manage okay if he's out of work in two years - but don't have Income Protection Insurance. Has medical and death thru his super fund and externally.

After something that is unemployment/redundancy based - not medical. Can you even get one that covers redundancy?

Any suggestions?

Speak to a financial planner for comprehensive cover...

But quick call to who his super will likely be able to put something in place through them with no 'out of pocket' expense as could be paid through his super.

Does he go underground in his mining job? As could find it very hard to get cover if he does.

 

[lizzie]

Speak to a financial planner for comprehensive cover...

But quick call to who his super will likely be able to put something in place through them with no 'out of pocket' expense as could be paid through his super.

Does he go underground in his mining job? As could find it very hard to get cover if he does.

Above ground - process management - will bring it up with him tonight

 

[tobe]

and when you get a quote, your going to find it much more expensive than you thought. If you can see theres a distinct chance of redundancy, the actuaries can too.

Id investigate other options.

 

[lizzie]

Id investigate other options.

... which are ... ?

 

[D_One]

If looking for redundancy cover, I believe CBA has somethin they call loan protection insurance. That will cover mortgage repayments for up to 6 months.

 

[tobe]

loan repayment insurance is one option, its a tick and flick, but I dont think it covers redundancy, or if it does only a couple of months of repayments rather than the whole loan amount.

Id suggest self insuring. Sometimes called investing, saving etc.

Sorry to be glib, but redundancy insurance, like all insurance is easiest and cheapest for the ones who need it least.

 

[Brady]

loan repayment insurance is one option, its a tick and flick, but I dont think it covers redundancy, or if it does only a couple of months of repayments rather than the whole loan amount.

Id suggest self insuring. Sometimes called investing, saving etc.

Sorry to be glib, but redundancy insurance, like all insurance is easiest and cheapest for the ones who need it least.

That is incorrect the CBA policy referred to does cover redundancy (unvoluntary). Can be up to a period of 6 months covering the monthly repayment amount pending cover taken out.

Self insuring in nice in theory but how much is enough? How long could you last without having any income? What happens as mentioned above you dont return to work?

Everything is easier if you don't need it.

 

[Scott No Mates]

Self insuring in nice in theory but how much is enough? How long could you last without having any income?

Plan to have enough to hold on to your property to execute your exit strategy - if that means continuing to hold and use money out of your offset or listing the property to reduce debt.

 

[china]

Self insuring in nice in theory but how much is enough? How long could you last without having any income? What happens as mentioned above you dont return to work?

About 3mil of unencumbered / inflation indexed income producing assets plus ownership of a PPOR should be enough for most people.

 

[wylie]

About 3mil of unencumbered / inflation indexed income producing assets plus ownership of a PPOR should be enough for most people.

"Most people" could get by on much less, and do.

Lizzie, I'd speak to a financial person. I know hubby (working for a two month contract now to help out an old boss) has a policy that covers him 24/7 no matter what he is doing, or what happens. We've discussed cancelling this policy each time it comes up for renewal, but if he falls off a ladder painting a house, he is covered for 75% of the income he was on when he took out the cover, and it could be indexed, not sure. It has a six or nine month waiting period though because when he took the cover, he had stacks of sick leave available to cover the waiting period and it also meant a cheaper premium. We know we can survive as he has not worked "full time" for about three years now.

Once we stop this cover, we will never be able to get it back without a much higher premium, so each year we bite the bullet and pay it, especially whilst we still have debt. It is tax deductible against the income he does make, and I do wonder if we would have to fight to be paid (but have asked two different brokers about it, plus the company) and it seems it was just a good policy.

 

[flightcrank]

The bank CBA pushed me to take out there income protection insurance when i got my home loan. i said no beause i thought it was unnessasary my LVR was only %60 or so. They just wanted easy money. Besides i was quite sure my super policy had a similer cover built into it. I never followed that up tho.

 

[lizzie]

Lizzie, I'd speak to a financial person.

That's cool ... we are covered with enough buffer to see us rather comfortably thru to the end of our days (with a little restructure) ... and insurances are in place for everything else ... just wasn't sure if you could get a redundancy insurance as - I think it was - PT Bear said something in another thread about had enough insurance to cover losing the job which got me thinking.

 

[wylie]

Sorry Lizzie. I did read "redundancy" but my reply was about income replacement, which is a different animal. I could have saved myself some typing because I've answered for a very different scenario .

 

[Brady]

The bank CBA pushed me to take out there income protection insurance when i got my home loan. i said no beause i thought it was unnessasary my LVR was only %60 or so. They just wanted easy money. Besides i was quite sure my super policy had a similer cover built into it. I never followed that up tho.

Low LVR is nice... but what does that mean? You could sell if you got into financial trouble? Already pay around 5% entry costs then around 3% exit costs... Then if you did sell costs to re-enter the market if thats what you want to do. Along with if it was your PPOR you would now need to find a place to rent... to me find its usually cheaper to have insurance in place.

I would have a look into what cover you have through your super and costs to increase it to the required level if its not currently sufficent which most arent. The CBA LPI cover is ok, its good for what it is a simple tick and flick and you're covered. But its not tailored to your individual circumstance so I would suggest speaking to a decent financial planner.

 

[tobe]

That is incorrect the CBA policy referred to does cover redundancy (unvoluntary). Can be up to a period of 6 months covering the monthly repayment amount pending cover taken out.

Self insuring in nice in theory but how much is enough? How long could you last without having any income? What happens as mentioned above you dont return to work?

Everything is easier if you don't need it.

so 'a couple of months' and '6 months' is incorrect? If you reread the OP the point is if redundancy happens, a new job most likely wont be forthcoming in the short term. My reading of this is short term income replacement isnt what the OP is after. And I suggest 6 months or a couple of months is short term in this context

 

[Brady]

so 'a couple of months' and '6 months' is incorrect? If you reread the OP the point is if redundancy happens, a new job most likely be forthcoming in the short term. My reading of this is short term income replacement isnt what the OP is after. And I suggest 6 months or a couple of months is short term in this context

You said that it doesn't cover redundacy, it does. You said if it does its only a couple of months, its not it's more... 6 months. And it can cover the whole monthly repayment amount.

loan repayment insurance is one option, its a tick and flick, but I dont think it covers redundancy, or if it does only a couple of months of repayments rather than the whole loan amount.

Again believe you have misread as OP has said re-employment isn't likely.

At mid 50's his chance of re-employment are not great when there are so many younger, equally skilled workers out of a job.

Whilst OP has suggested short term insurance might not be what they're looking for if they had it in place then the reserve of funds wouldn't need to be used until later.

As mentioned above I would suggest speaking to a decent financial planner who would be able to provide some specific advice.

 

[tobe]

The OP asked me for some suggestions. I suggested a specific insurance process 'tick and flick' or sometimes called 'no advice', because if an underwriter got involved insurance would either be denied or expensive. I said it probably doesnt cover redundancy, or if it does only for a couple of months.

I dont think the OP is interested in short term cover (whether a couple or six months) as they are contemplating not being able to be re employed again afterwards.

I appreciate your comments, its great to know your bank covers redundancy for 6 months. However I dont know enough about your banks insurance policies to know whether the product you are quoting is comparable, ie tick and flick. If its not, if a financial planner is involved, then its not really comparable to my suggestion.

NB, Im not an insurance specialist. I have only had limited experience with the no advice model of insurance directly, and the rest of my knowledge is what I have picked up reading etc.

 

[Crabnet]

After something that is unemployment/redundancy based - not medical. Can you even get one that covers redundancy as all documentation implies medical only?

Any suggestions?

Interesting. When you think about it one wonders how an insurance company could cover the risk of offering redundancy insurance to people in their fifties.
You would think the premiums would need to be very high and the benefit payable over a limited time.

A quick Google throws up this.

Does Income Protection Insurance in Australia Cover Redundancy?

Cover for redundancy is currently only offered from general insurance providers in Australia. At present it is illegal for life insurance companies to provide benefit payments for policy owners that are made redundant.

The main purpose of income protection insurance in Australia is to provide an ongoing benefit payment to cover losses incurred following a serious illness or injury. There are some life insurance policies that will provide assistance to policy owners if made unemployed by waiving premiums that are payable for a specified period. In addition, there are a select few policies that will cover outstanding loans i.e. car, mortgage for a specified period of time if the person is made redundant. This is only available if these loans have been taken out with the same provider.

Redundancy Cover on Mortgage Protection Insurance

Redundancy cover is usually offered as an additional benefit on mortgage protection policies, covering ones mortgage repayments for a specified period if they are made redundant.

Redundancy Cover from General Insurance Providers

While there are some insurance policies offering a benefit payment for redundancy in Australia, there are usually a number of conditions on these policies that restrict when a benefit will be provided. People will usually have had to have been employed continuously with the same employer, be made redundant through no fault of their own (can be extremely difficult to prove) and unable to receive any other form of income throughout the waiting or benefit period.

Anyone looking to find protection for redundancy should take the time to assess if they really stand to gain any benefit from it or if it will just be an expensive extra that may have been better put towards an emergency savings fund.

 

[Joe D]

I suggest you refinance and try to get any LOCs extended to the max whilst you have his income to include in the application.

Even if you don't need it, it will still be there for additional investing or a future buffer.