Income protection?

To be honest, I’ve not done a lot of research to share with this post, but seeing as we’re in different corners of the globe, well, it might be moot anyhow!

What's the chance? soruce: Shelley Marsh
What’s the chance?
soruce: Shelley Marsh

So, for a long while, I have been ruminating about getting income protection insurance.  My superannuation (which is the retirement savings in Australia) covers death, and that would go to whomever I choose (my brothers at this time in life).  But what if I accidentally chopped my hand off (not likely)?  Or if I got electrocuted and couldn’t work anymore (much more likely)?  I know there’s workers compensation, but I don’t think that’s a successful insurance plan.

Have you consider income protection?  How relevant do you think it is?  I wonder how many people are temporarily or permanently disabled, statistically?  Would it be worth it, or would if I decide not to get it, and something horrendous did happen, would the state benefits have me living as a pauper?  Would I burden my family and friends with my poverty?  So many what ifs….

More questions than answers, so I welcome your thoughts and ideas!

19 Replies to “Income protection?”

  1. I have permanent disablement insurance through my Super as well as death insurance. I've tried to drop the death insurance because I don't have any beneficiaries, but it seems difficult to drop that and keep the disability insurance. I don't really know that much about it either.

    Are you sure that your super company doesn't include disablement insurance automatically? I've been with quite a few over the years and they've all included it as standard (automatically charging you for it!)

    1. SO I do have both Death and Total and Permanent Disablement, but then there's a super based option for income protection which I don't have. Now there must be some difference in what this product would offer, right?

  2. I don't know much about the income protection plans available in my country much less yours, but I have been a bit leary to embrace them. As you know I was raised with savings being the first thing to think about when it came to money, and second paying cash for everything. If you built up a decent income that would hold you over for 6 months to a year of your basic expenses you would more than likely find employment that fit your disability if that should happen. These plans, I was taught, were for people who lived paycheck to paycheck and didn't have any savings to fall back on. If you are injured on the job here in the US, your employer would have to pay for all your medical needs and after that you would get disability payments. While the governments financial status, along with the financial solvency of businesses, is at a all time low I still believe this is a way of throwing good money away based on fear of the unknown.

    Just my opinion, that of coming from a time before all these things were offered. Take it or leave it. 🙂

    1. You raise a very good point. Although I do wonder about cancer etc… I'm similarly inclined whilst I have large cash reserves, enough to live off for 10 months, and in which time I could sell my apartment. It's definitely something to consider, insurance is largely about playing on fears and what ifs.

      You are very philosophical today/night – what are you eating and drinking, I'd like some!

  3. I only just recently took out Income Protection Insurance. My policy covers different (more broad) criteria than the Disability Insurance e.g. if I was sick enough not to work for an extended period of time, but not actually permanently disabled e.g. I guess chronic back pain, certain chronic sicknesses that are not strictly a disability. It covers things that would in a medical opinion make me unfit for my job as a teacher but not yet disabled.

    The reason I got this right now is that we are planning private education for the next 8 years…our savings would cover Living Expenses if I got sick but would never stretch to covering 8 years of private school. I don't want to have to pull him out of school if something untoward happened! The cost of my policy was not astronomical and something we are factoring in to the schooling decision.

    1. Thank you for sharing all this – I really appreciate hearing the different opinions on this topic, especially from people who are at different stages of their life too. So I gather you didn't previously have it? I do like the idea of the illness/injury making it hard to not be in your profession, and therefore take a pay cut, which would potentially lead to larger life changes, such as your son's schooling, moving house etc. All worthwhile considering.

      1. That's right – we didn't have it earlier. It's really only to "maintain lifestyle" (i.e. schooling costs) that necessitates it now!

        OT but oh my goodness – I am just looking at the bushfire reports from Sydney. Is it involving you on the work front with poiwer?

        1. The bushfires affect us, the woman over my shoulder at work's portfolio is getting things 'bushfire ready' with regards to keeping power lines from sagging too much or getting too close to one another. The wind and heat that come with bushfires also mean higher loads, and more lines down (which can spark fires too). Thankfully, I've not had any fire related emergencies and I'm not on call anymore (I was last week though!) so happy to report it's business as usual, for now!

  4. I would only get it if I had dependents, that is.. people who depend on my income, would suffer if I died.

    This is of course, assuming you already have enough in your estate and in savings to at least cover your funeral.

    1. Even without dependents though, if you couldn't work for the rest of your life (say a brain injury whilst swimming in an exotic locale), would you be able to cover your expenses from this day forth? I know you have a large savings account, and likewise your partner, but even without kids, no income is a struggle unless you are financially independent.

  5. The way the system works here is: if I had an accident on work time that caused me to lose time, the Workers Compensation system would pay me a percentage of my salary while I was off work. They would also supervise my recovery plan and return-to-work plan, and they would decide if I was too disabled to return to my job at all. If I couldn't return to my regular type of work, they'd switch me over to unemployment insurance and make a plan to train me in another field of work.

    My employer pays for "accidental death or dismemberment insurance" for me in case something drastic happens at work. Accidental death benefits go to your beneficiary; accidental dismemberment goes to you if you lose a hand or an eye or something like that!

    If I had an illness, surgery, accident etc unrelated to work (not caused by work), I have purchased group insurance for that. Short term disability insurance covers a few months of leave, and long term disability insurance covers if I become permanently unable to return to work. Both cover a percentage of my salary while I am off (I pay for 60% coverage).

    We also "earn" paid sick time every month and we can bank up to 1000 hours; so if I was recovering from something, I would take my 1000 fully-paid hours first (about 28 weeks), and then switch over to short-term or long-term disability.

    I also pay for life insurance through an employer plan.

    1. Very interesting Dar, and somewhat similar to Australia. I do have 30 days worth of sick leave too, I just can't help thinking of all 'what ifs' like brain injuries, or cancer or things that take a lot longer to 'recover' from, if ever. But I see you've purchased what you call group insurance which seems somewhat similar to income protection insurance. Thanks for your thoughts!

  6. My husband has income protection insurance rather than disability insurance because our FI told him that disability requires a huge burden of proof, and income protection is automatic, no matter what caused the income loss. Of course, I could work if he couldn't, but what if he needed permanent care? That would be me.
    Again, if he was injured at work, work cover would pay, but what if he was in a car accident on the weekend? Much more likely.
    Also, his income insurance has provision if he has to quit work to care for me, so because we have the children, we have decided to go that road.
    It's a tricky area, and we didn't have this insurance for years, because it was one expense too many, and I know our family would always rally round if we were in a jam, but now that we can well afford it, we have it so that life will be that much easier for everyone if the worst happens.

    1. You touch on some great points – such that income protection is for a greater variety of things than Workcover would pay out for. And I agree, with any insurance, and disability being key, while you might be disabled to one person, to another, you can work, even if not in your profession. And then all the minefields of dependents, yourself and the children. I agree, it's a cost you can easily avoid or ignore, but it's been something I've ruminated for a while now, and it helps to have other people at different ages and stages weigh in and help me consider all points of view. Most 28 year olds aren't talking about this, though a colleague serendipitously bought it up yesterday!

  7. I wanted to get some kind of accident/permanent disability/not able to work insurance not long after I moved here. I was told that I shouldn't even bother to apply for the Berufsunfähigkeit (inability to work) insurance because I had had psychological therapy in the previous five year and that would automatically disqualify me. One of those very annoying things where because they know you've had problems, they consider you to be a higher risk for what the call "burn-out syndrome" here – not at all accepting the fact that it's the people who've actually gone and gotten help and done something for their mental health who are probably going to be lower risk! Sigh.
    I recently decided I needed to really finally get around to at least getting some accident insurance and got a quote for that. It was so high I haven't found the wherewithal to go back to the broker and figure out how to get it down. But honestly, the quote was for nearly 150 per month and that just didn't seem worth it to me (I sit in an office all day – not the most dangerous pastime in the world!). While I could technically afford it on my current salary (once I'm debt free), my plan is to change to a different environment in the next couple of years and I'll probably be earning substantially less and definintely not able to afford that.

    1. Wow that is slack that you pretty much can't get it because you've had (what I assume is) a mental illness. It's like you'd be better not getting help for it!

      What's the career change plans, or do you just mean locale? 150euro a month is a lot!

      1. Same basic job but just in a different place. I currently work (as a secretary) for one of the large accountancy firms. And I'm really over the whole corporate thing, to be honest. Not to mention that it kind of sticks in my craw to be trying to make ethical choices in my personal life and then having to go to work and help save lots of those companies I avoid to save billions in tax. So, once I'm a bit more financially stable, I'm going to try and get a job (still secretarial, 'cos I do love the work itself) in a university. Things have changed so these days I wouldn't actually be a civil servant (with the pension and permanency advantages that traditionally come with that) but my salary would be subject to the state tariff agreement in place for university staff, i.e. far less than I earn now in the private sector. But I think I would really enjoy it so that's my aim. Also part of the reason I am doing the exams to become a state recognised translator at the moment, so that when the time comes, I will hopefully have something that I can do on the side to earn a bit extra. I'd take the opportunity to move location as well – would really like to move further south, closer to the Swiss/French borders. I used to live in the Black Forest and loved it and I'd be that much closer to my sister (who lives near Annecy/Lyon), too.

        1. Ah I worked in the university when I was studying in a clerical role. Still I know what you mean, even if the pay isn't as good, you need to work somewhere that aligns with your balues, and a university is much more likely to than an accounting firm! So will you translate from German to English? Germans are so good at English, I find!

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