You ability to ear an income is your biggest asset! Most people without any real thought insure their house of car because they are tangible assets that they couldn’t afford to fix or replace in the event of damage of loss.
Although a house can cost hundreds of thousands of dollars to replace did you know that the most valuable asset you have is your ability to earn an income. If you are temporarily or permanently incapacitated and are unable to earn an income the fuel that fires the ongoing lifestyle and dreams of you and your family quickly fades causing immense stress and hardship.
Indeed a long term income protection claim can run into many millions of dollars which puts income protection up there as one of the most important risk insurances to have.
Many people assume that their income is protected either as a result of workers compensation entitlements as an employee or maybe from cover held within their work Superannuation fund. This can be a BIG mistake!
Unfortunately when the worst happens and a long term claim results they may find they don’t have the cover they thought they had.
Work Cover Insurance
The Workers’ Compensation and Rehabilitation Act 2003 (the Act) states that employers must insure their workers with WorkCover Queensland under an accident insurance policy. Each state has its own legislation so this is just an example.
The Workcover web site (www.worksafe.gld.gov.au) states that – ‘Employees may be covered as long as the injuries arise out of—or in the course of—employment, and the employment is a significant contributing factor to the injury’. On this site it also says – ‘It is important to note that this policy is not the same as income protection and does not provide 24-hour cover.’
The cover is restricted to workplace attributed accidents and injuries so what happens if you are off work as a result of a sickness or any accident or injury that is not work related?
What happens if you are not an employee – may be you have been classified as a contractor or are self employed or trading through an entity like a company or trust?
According to a TAL insurance guide in 2012 they paid out 30% of claims due to accident with 70% due to sickness including muscular skeletal/cancer/mental health/heart disease and stroke/ other (from Your Insurance Guide – Life Choices at your Fingertips – Income Protection – TAL) .
So if you think that Workers Compensation cover (good as it may be) provides a complete safety net, this is just not the case.
What about my work provided Super fund?
Time and again as I review clients insurance inside their industry or employer provided super funds I find that most people really don’t understand what they have inside their super.
Even if salary continuance or income protection does exist it is usually a default cover that either underinsures the income they would receive or has a benefit period that is only 2 years or maybe 5 years. Good long term cover with appropriate income levels is quite often available but has not been availed by the member as they only accepted the default cover. The other problem I usually see is that people do not have binding nominations in place to ensure the right person receives any death benefit proceeds (but that is another story).
The recent Stronger Super legislation has also aligned the cover inside super fund with SIS legislation and in the case of income protection I have seen that many income protection insurance benefits that can be obtained in a good non super retail products are not present in the Super held income protection product eg. agreed value options that give peace of mind related to the claim, level premium options for long term affordability and many comprehensive benefits involving rehabilitation, hospitalisation, scheduled injury payments, premium freeze etc.
Problems can also arise if the life insured leaves the employer where the employer contributions stop along with the cover. A person can change employers or even industries and lose cover in one fund only to find that he may be uninsurable due to a medical condition like diabetes that has arisen since his initial cover.
These are just two examples of common misconceptions related to Income protection cover.
It is better to seek help from a specialist in this area and review your current income protection cover.
This is where you can be assisted through the minefield, of strategy, amount of cover, structure of cover, company/product choice and policy wordings along with yearly reviews and help from an experienced specialist at claim time.
CLICK HERE If you would like a review of your present personal or business risk insurance strategies or policies. You will be directed to a form that will gather some basic preliminary information that can be assessed by an experienced, accredited insurance specialist who will assist with you to better understand the choices related to your income protection and other risk insurance needs.
General Advice Warning:
The information contained within this website does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances or you may make a decision that is not in your best interests.