Dont Get Caught Short On Income Protection Insurance
If you have income protection insurance you probably know a little bit about it and you are most likely aware that it can provide you with an income while you are off work during a period of total disability
, but do you know how long those insurance payments will last?It used to be when you took out an income protection insurance policy within your superannuation account you would have few if any options about how to structure it. The most common available choice offered was to select from three or four different wait periods, usually 30, 60 or 90 days, which was explained in their documentation as the period you would have to wait after your illness or injury had rendered you disabled, before your payments would commence.
Those were the simple days!
An Unfortunate Story
Mark was a young, outgoing graphic designer with a job in a little boutique firm in a loft warehouse in the south of Sydney, he loved working and would often put in long hours, but he would still find time to get out and meet new people on the weekends.
At just 34 years of age Mark was in his prime and seemingly nothing could stop him. Unfortunately, one weekend bush walking, Mark slipped on some rubble that had been dislodged by recent rain and slid off the side of the track, tumbling down a steep ravine.
Thankfully Mark was airlifted to safety and had income protection insurance, which after the wait period was complete, started to provide him with regular monthly payments of 75% of his pre-disablement wage. These were a big relief to Mark as his recovery progressed slower than originally anticipated and he required several further operations along the way.
Then one day, Mark received a letter from his superannuation fund informing him that his insurance payments were about to cease.
Although Mark had significantly recovered during the two years since the accident, he still was attending rehabilitation and was not yet able to walk properly. He had not been able to get back to work at all due to the building configuration and was only able to complete a few hours a day working from home.
Income Protection
When worrying about your recovery, do you really want to face the reality of possibly losing your home, defaulting on your bills and wondering how you were going to afford your next meal?
As you can see from Marks story, having enough insurance is vital.
Being young means that you potentially have a lot of life in front of you and somehow you will need to keep on finding the money to pay your accommodation expenses, eat and live throughout all of it, and if you cannot work, that could be very difficult.
There are two terms of income protection insurance now offered in Australia. These are a 2 year benefit period, like Mark in the story above had, and a to age 65 benefit period, which is now frequently offered by Australian insurers.
To age 65 will continue making insurance income payments at 75% of your pre-disablement income until you turn 65, you recover or you die, which means you will never have to worry like Mark did.
But I Have Disability Cover
If you have total and permanent disability cover, you certainly will not be in as dire a situation if you were to be deemed totally and permanently disabled after your accident. But what happens, if like Mark your recovery is expected to be complete, but is just slow or hampered?
A total and permanent disability policy in this case will not pay out, and even if you were declared totally and permanently disabled by your doctors and you were to receive a lump sum benefit, how then would you make this money last the rest of your life?
Having a complete set of insurance cover that includes life, total and permanent disability, income protection and trauma is the only way to secure your financial future against unforeseen accidents or illnesses.
In addition, dont forget to ask the questions and work out what benefit options will work best for you. Ensuring you are covered for the distance could be the best decision you ever made.
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