Question regarding Life Insurance, TPD, Trauma and IP

[mumbai]

I have been procrastinating getting a life insurance since some months now. I will soon be 35 and believe its time for me to decide and get one asap. I have a few questions and would appreciate if someone can guide me in the right direction:

1. On what basis does one decide the amount of Life, TPD and Trauma cover? Does it have to just cover the mortgage(s) or more?

2. Do you guys suggest having all of Life, TPD, Trauma and IP or leaving one of it out?

3. Is Stepped premium style advisable or Level?

4. Is 30 day waiting period enough for IP or less (or more)?

5. I received online quotes from a couple of insurance providers. Both suggest Onepath, as it has the lowest premium and better value. Do you guys have feedback on the insurance providers.

6. Also, it is advisable to sign up through them or meet some financial planners face to face? Do you guys have any recommendations?

I know most of the questions would be like asking how long is a piece of string. But, just some advice/suggestions would be appreciated.

 

[Terry_w]

1. Whatever you think will be enough for your family. It doesn't have to cover all your debts. If you had large equity your surviving spouse could just sell a property to get access to some cash.

2. Also up to you. You need building insurance, but the rest are optional. I am not sure what the difference is between trauma and TPD - some TPD policies could cover trauma.

3. Insurance becomes increasingly expensive as you get older. Again, depends on your situation and the policy.

4.

5. There are hundreds of policies out there

6. You should get some advice on the policy and insurances - how do you hold it, inside/outside super and what are the tax consequences. How should you leave it to as beneficiary - spouse, estate, super, trust etc. Income from insurance payouts is concessionally taxed in the hands of children for example.

7. I work with a financial planner in Sydney. If you want his details please send me an email/pm.

 

[devank]

My comments are based on my recent experience which is based on my own situation.

I will soon be 35 and believe its time for me to decide and get one asap.

I believe these covers get more and more expensive as you get older. Also, they may not cover you once you have certain issues.

1. On what basis does one decide the amount of Life, TPD and Trauma cover? Does it have to just cover the mortgage(s) or more?

I would get at least enough to cover the all your mortgages.
Remember, it may not be easy for one to go to work if the other is handicapped or worst. For example, we have 3 kids under 5. Currently, we can both work only because two adults are sharing all the work. If something happens to one of us then it will be very difficult for the other person to work.

2. Do you guys suggest having all of Life, TPD, Trauma and IP or leaving one of it out?

In my view, TPD and Trauma should be a decent cover simply because the cost of living will be lot higher if you are hit with one of them.
Recently, we had a car crash. The first thing went through my mind was “Do we have enough cover?”

3. Is Stepped premium style advisable or Level?

I think it depends on how much you can fork out now. I think you can go with ‘Level’ if you think you will be self-insured or need for insurance in later in life is not critical. If you want more cash in your pocket then you can go with ‘stepped’. Potentially you can invest the money you are saving by going ‘stepped’.
However, I considered these insurances as one way to ‘secure our future’. Hence, instead of buying and IP I decided to pay more now (Level) so I will be spending less (with inflation) in the future.

4. Is 30 day waiting period enough for IP or less (or more)?

You will notice that the premium gets cheaper as you increase the waiting period. You are more likely to be out of work for 30 days than 90 days due to injuries.
I went with 90 days because I have a six month buffer. I would rather spend less but have the buffer in my offset.

5. I received online quotes from a couple of insurance providers. Both suggest Onepath, as it has the lowest premium and better value. Do you guys have feedback on the insurance providers.

I’m also with Onepath. I would strongly suggest you get in touch with a broker. There are so many things we cannot understand. Those guys do this as part of their job! I went with my broker’s suggestion. Most my loans are with ANZ. I think Onepath pays the ANZ’s mortgage for a certain period. My broker works in your area. PM me if you want his details. He helped me in many aspects. Brokers can help you to make any claims as well. At least you won’t be alone when you are in trouble.

 

[HotRod]

Wife and I just went through this whole process firstly as a cost saving exercise.

We ended up getting Life/TPD through our super purely to avoid paying with after tax dollars and thus not really have to "pay" for it.

We ended up also getting Trauma insurance as well but this had to be outside super and thus not really save us any money.

However, we have a lot more insurance than before.

Have not got IP as I work for myself and don't really need to work anyway.

After looking at the modelling of the differences between level and stepped we chose the level insurance. Stepped might be cheaper for the first 7-10 years, but after about 13 they are the same in total premiums paid and then level works out a heck of a lot cheaper in the longer term (think it was something like $12000 v $3000 annual premiums in Year 20 )

We probably don't really need any insurance as our IP currently provide an income for life and should we both go, the kids will be well catered for.

We just decided that another several mill would be a real safety net for them.

Should either of us only go, then the life insurance will allow some debt to be retired and hopefully cover the lot and pay them all off in say 5 to 10 years.

The look on our insurance broker was priceless when we went through all our finances and goals. We ended up probably helping him more than he did us.

 

[HD_ACE]

Just to add...

If you get ip income protection, make sure you get a policy that will pay you until your 65. Nothing worse then being involved in an accident or something and being permanantly disabled in someway and then after a couple of years your policy is finished.

The waiting period will depend on your buffer and 90 days is alot cheaper than 30.

I have life and tpd in my super. And i have trauma and ip come out of my pocket. Ip is tax deductible which helps. Which also means any payouts will be taxed.

Hope this helps.
Cheers

 

[mumbai]

Just to add...

If you get ip income protection, make sure you get a policy that will pay you until your 65. Nothing worse then being involved in an accident or something and being permanantly disabled in someway and then after a couple of years your policy is finished.

Wouldnt that be covered under TPD insurance?

Also, I am a bit confused with the cover I already have with my Super. Why should I get a whole new insurance cover when I have TPD, Death and IP in built into the super (though they are all basic covers, with option to increase them)?

How important is the Trauma insurance cover? Seems like it is the most expensive of all.

 

[Peter_Tersteeg]

Wouldnt that be covered under TPD insurance?

Also, I am a bit confused with the cover I already have with my Super. Why should I get a whole new insurance cover when I have TPD, Death and IP in built into the super (though they are all basic covers, with option to increase them)?

How important is the Trauma insurance cover? Seems like it is the most expensive of all.

Regarding the insurance through your super, chances are you probably don't have anywhere near what you may actually need. As an example, it's areadly been suggested that your IP cover last until you're 65, but when written through your super it only lasts for 2 years.

Trauma cover is there in the event you need to be covered for interesting medical problems. Someone close to me was recently diagnosed with breast cancer and is very greatful right now that she has trauma cover.

My advice is generally to get a good insurance broker of financial advisor to help you answer your original questions. Personal insurances are something that should be very specifically taylored to your circumstances and needs. There's no easy flow chart to figure it all out. If you don't know the answers yourself, you need to get a professional to help you.

 

[Rolf Latham]

Paying life and IP out of super is all good and well....... but

Within our planning business , we find most clients don't consider that most super based IP policies are time limited to 2 years Max benefit

And

What will your super look like when u get to retirement. ??

Most folks that come through our doors think that super is some one else's money, and its OK to spend that... its a whole can of worms and isn't dissimilar to the sometimes stoopid car sal pack arrangements that have been pushed out

Ta
Rolf

 

[moyjos]

We have enough life insurance to cover all debt plus one years wages. I figue this means if one of us dies there is some "grieving' room without having to worry about where the next meal is coming from. I re-assess the level each year as our debt reduces but wages(cost of living) rises.

We have a 90 day waiting period on my IP insurance and a 30 day on hubby's. As my role in the businesses is admin, we figure i would have to be REALLY hurt ( in which case trauma might kick in) for me to not be able to work in some capacity. Hubby is the tradie so is more likely to "break a leg" and not be able to work in full capacity. We do have a 6 month wages back up so if he is unable to work I would be able to employ more staff to take up some slack.

We are with OnePath. It was with Colonial Mutual to start, then got taken over by ING and now with ANZ Onepath. It gets hard to keep track of who the heck we are insured with.

 

[HD_ACE]

Wouldnt that be covered under TPD insurance?

Also, I am a bit confused with the cover I already have with my Super. Why should I get a whole new insurance cover when I have TPD, Death and IP in built into the super (though they are all basic covers, with option to increase them)?

How important is the Trauma insurance cover? Seems like it is the most expensive of all.

Tpd is a one of payment so depending on your policy 100k or 200k etc
Ip will pay you 75% of your wage until your 65 if thats your policy. Which could also mean an illness etc preventing you from working which tpd will not pay out for.

Imo 2 years is not enough. You need to prepare for worst case.

Cheers

 

[big_head]

My wife has ip to age 65 with a 90 day period for own occupation. I have 'unlimited' sick leave and because of my job ip just isn't worth it.

We both have life, tpd, and trauma. Life is our debt plus 2 years wages. trauma will pay all of our debts and give us 2 years wages as well. tpd is will provide enough for us to both not work again, pay off debts and live comfortably.

I hold life insurance and tpd through my super (it is quite substantial and cheap through my super), with a top up of life insurance (as private companies apparently pay out quicker than super) for quick access to keep the pressure off my wife. I also have a top up of TPD outside of super to cover the shortfall. My wife has a smaller amount in super, and a substantial top up outside of super.

Something to be careful of, with ip there are two policy types. OWN occupation or ANY occupation. Obviously the premiums vary significantly.

Insured with TAL. Reasons, my broker reckons they are good based on his dealings, their trauma is more comprehensive than onepath with some cancer definitions, and TAL are understanding of my occupation. Previously with Onepath. We are young, so stepped premiums initially. Plan is to stay this way until we get our investing underway and have kids. Once our long term financial needs are more concrete we will go level. Price difference was substantial, around the 50% mark from memory. Worth it long term, but if we chop and change cover we will erode that.

IP through super isn't always the best. In my case its basically 24k over 2 years and then it stops.....not even close to my income. Privately, as stated, ip is just too expensive and the cover is inadequate given my job. They will also only cover me for 2 years......

 

[s0805]

I currently have TPD & Death and IP through super. After reading all of the above I am seriously considering giving more thoughts of keeping insurance outside super.

can anyone advise when making claim through super how does the process work generally, I mean Insurance company will pay the claim to my super company, super will pay it to my account, are there any conditions if (tax or something) these money needs to come out of super to support....

Sort of newbie question, after reading definitions about the insurance types, don't you think that TPD & IP (one till 65 yrs age) will clash..i mean how do they decide which one to pay....

 

[mumbai]

I am having a hard time getting a good insurance broker(?) or financial planner to provide me life, TPD, Trauma and IP insurance quotes. Can someone recommend good ones, they would have used and happy with.

 

[mumbai]

bumpity bump!!!!

 

[mumbai]

BTW, I already emailed sagelending.com and did not get a reply yet. Any recommendation for Sydney based insurance advisers?

 

[DaveM]

I am having a hard time getting a good insurance broker(?) or financial planner to provide me life, TPD, Trauma and IP insurance quotes. Can someone recommend good ones, they would have used and happy with.

I sure can. David Kerr from TAG Financial in Bella Vista. Happy yo pm you his details if you like.

 

[lidirect]

Question 1:

How much life insurance you require comes down to you and what you want. Generally, it is advisable to make sure your mortgage and any other major debts you have are covered.

Other things you may want to consider are providing funds to maintain your family’s lifestyle, your children’s education expenses and if you want to leave funds your children’s future.

Question 2:

Again, it depends on your individual circumstances and how much cover you can afford. Each type of insurance protects you in different ways and it is important to understand what each type of cover does before making any decisions.

There are a number of options available to you if you want a number of types of cover if you cannot afford the premiums, including combined policies and split policies.

Question 3:

Stepped Premiums start off cheaper than level premiums but increase as you age, whereas level premiums do not increase as you age.

If you can afford the higher amount of level premiums (they can be as much as 50% more expensive), it may be better for you as they will be more affordable in the long term.

Select insurers also offer a third premium option known as Hybrid or Blended Premiums. This premium style combined some of the elements of both stepped and level premiums which you might also like to consider.

Question 4:

What waiting period you want will generally come down to:

• How long you can afford to be off work for
• How much leave (sick and annual) you have
• Any income your partner earns
• Your ongoing financial commitments
• Affordability – the shorter the waiting period the higher the premium
• How soon you need to start paying your ongoing expenses

Question 5:

Each provider will be different and will offer different types of cover and different benefits. Which one you decide will generally come down to your own individual circumstances and what you can afford.

We provide a free comparison service of some of the leading life insurance companies in Australia. As of June 2013, we compare 13 providers and offer free transparent quotes so you can see premiums for each insurer we compare.

Question 6:

It is always best to speak to a financial adviser, whether this is on the phone or face to face. A financial adviser can provide you with advice based on your individual circumstances and guide you in the right direction.

 

[kero]

Would anyone know if income protection covers cancer treatment where chemo, radiology and surgery is required? I understand different react differently to those treatment. So if those treatment causes the person to be unable to work, does income protection covers it?

 

[DaveM]

You would typically take out trauma insurance to cover cancer, heart attack etc as most ip policies exclude them

 

[Peter_Tersteeg]

BTW, I already emailed sagelending.com and did not get a reply yet. Any recommendation for Sydney based insurance advisers?

I hope you weren't trying to reach me with this. Insurance isn't actually something we do, and sagelending.com (without the .au) was a USA site. I think they went bust sometime in the GFC.

Would anyone know if income protection covers cancer treatment where chemo, radiology and surgery is required? I understand different react differently to those treatment. So if those treatment causes the person to be unable to work, does income protection covers it?

Someone very close to me is currently undergoing these treatments. She's very grateful for all the trauma insurance that she has as it's giving her the cash to pay a lot of the expenses not covered under medicare and private health cover.