Lachlan’s Blog

Look, we know it will “never happen to you” but what if it did?

What if you couldn’t work for a while?

It is almost always something you least expect.

You break your leg on the football pitch, an idiot crashes into your car,  you fall off your bike, or you get sick suddenly and you  can’t work for a while.

These incidents would more than likely not be covered by workers compensation or any other disability benefits. Your sick and annual leave only stretches so far.

If your income stopped, how long could you live on your savings?

Many people don’t like to talk about insurance.  I hear all the time, “It is too expensive and I’ll never have to claim”. Insurance also conjures up memories of those terrible day-time infomercials advertising incredible cover for only 50c a day!

Why do we accept that we need to insure our car, our home and contents, but find it difficult to justify the expense of protecting our income?

A lot of people that I come across seem to prioritise saving money, and reducing household expenses.  But, by doing this, they are unwittingly putting their home at risk.

If you couldn’t work for a while, how many months could you last on your savings, before you had to choose between repaying the mortgage or feeding your kids?

What is Income Protection?

  • Income protection provides you with a benefit should you temporarily be unable to work due to sickness or injury.
  • It generally pays up to 75% of your gross income (this is usually capped at a set $ amount such as $10,000 for example).
  • Policies have a variety of waiting periods – this is the period from when you let the insurer know of your claim until the benefit starts to be paid. It is important that you consider how long a waiting period you can logically afford (how much savings do you have to cover a period with no income).
  • Policies have a variety of benefit periods – this is the length of benefit payment. They can range anywhere from two years or “to age 70” for example.
  • Premiums can be steppedwhere the cost of the premium increases with age; or level – where the cost of premium remains the same regardless of age. The type of premium you choose will depend on how long you intend to hold onto the policy, and also on your current and future cash flow position.

 

We help clients not only protect their most important asset, their income. We also support them when it comes the time to make a claim.  It is the clients that we help claim on these policies that continue to highlight to me how important it is to have some income protection in place.

There are many real life stories that I could share with you, where we have helped a client claim on their policy after injury or illness,  but here is just one…

Jack* was a CSP client who never would have thought he would have to make a claim….

It happened to Jack*

Accidents do happen…

Jack* never thought he would ever have to claim on the income protection insurance that he had in place. The only reason he held an income protection policy was because his parent’s organised the appointment with us. They were concerned that since he had finally left home, his income needed to be protected should anything happen. After all, they didn’t want him having to have to come back home, and lose his independence (as well as disrupt their lives!)

He didn’t really appreciate how important it was and just saw it as less in his bank account at the end of each month. He was a healthy, young, 28 year old…What could possibly happen?

Ten months after taking up the policy, Jack was at a party and in a moment of youthful exuberance, fell from the second floor balcony at a friend’s place. He suffered multiple fractures, and breathing difficulties as a result of breaking several ribs.

As a result of having cover, Jack was paid a benefit of $3000 per month (75% of his salary) for a five month period. Without this cover Jack would have had to rely completely on his parents to support him during this period. He was able to continue to pay the rent, and following his recuperation was able to resume the life that he led prior to the accident (minus the balcony diving!).

*Names changed for privacy reasons

Put yourself in Jack’s* place. How would you be able to keep paying the rent, as well as medical costs for five months with no money coming in? The problem is easily solved, and the process probably isn’t as painful and pricey as you might think. Give our office a call and we can give you an idea of what might be best for you.

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  • quote We are very impressed with the strategic and lateral thinking applied to our personal financial circumstances. What’s more the professional staff at CSP seemed to derive a sense of pride for what they achieved on our behalf. quote Keith and Jo Dunham