Making sure your not paying too much for your insurance is important, almost as important as having the right type and amount of cover.
There are several reasons we end up paying to much for insurance and they are normally our own fault. The simple answer to reduce the amount of cover to reduce the premium will achieve a lower premium but may also severely reduce the protection the cover offers.
So what is to be done? Well the answer is to start with the whole reason we wanted insurance in the first place and why we want insurance now! What do we want the insurance to do and how can a little personal compromise gain a lot in premium reduction?
Insurance policies are complex items, they are structured of features and options built up to suit the individual. Lost in much of this consideration is our thoughts on how long we are truly going to commit to our personal and family protection. For this reason many policies start their lives as "stepped" premium policies as these are the cheap format for a set design of cover, yet over time will result in a higher overall premium. The option of "level" premium is simply to start with a higher premium and have this premium "normally" stay the same over the lifetime of the policy. How do we make a saving with Level premiums? We ask our broker to calculate the cost of both covers from now to the time we will give it away, in many cases savings are in the hundreds of thousands of dollars.
Income protection as the name suggests is designed to protect our income if we can't earn it through sickness or injury. While many of us can afford to look after ourselves by asking for help from family and friends this may only last for a short period of time. For most of us we require our income to continue to come to us well after the support of family and friends dries up. Through our normal lifestyle of working and retiring we know we need our income to continue up to the point where we are happy to stop earning and rely on what we have built up. With this thought in mind it is easy to see why we need an income protection policy that covers us until the same time as we would have normally retired. Additional to this length of time we can also understand that for short periods of time we can still support ourselves without the need of the insurance. So is their savings to be made in this lifestyle decision, quite possibly is yes.
The premiums on income protection vary greatly depending on when the policy starts to accrue funds after the incident. Commonly income protection policies see 20% premium reductions when moving starts of a claim payment from 30 days to 90 days. Initially one's reaction would be to believe they cannot exist for 90 days or more without income, yet the true value of an income protection policy is not in how long it takes to start paying but how long it will pay for.
An average income in Australia of $55,000 a year over a lifetime of earnings will produce an indexed some approximating $2 million. The difference between having an income protection policy start at 30 day's versus 90 days is two months of salary. To save premium moving the start date from 30 days to 90 days while retaining the length of time and the value of the benefit per month will result in a much higher payments for a long-standing claim than simply using the original analogy of reducing the cover amount to reduce the premium.
The cost of options and features may each be small but once added contribute to a lot of the premium. Going back to our principal for the primary reason of taking out the insurance, is all those extra benefits necessary? When reducing the cost of premium on individual features and benefits you may get the added benefit of also producing the amount of government duties applied to the policy.
In conclusion, taking control of your income protection policy through regular checks of its market position and relevance to your lifestyle can deliver significant savings both short and long-term. Having an active insurance broker by hillside during this process is not an expendable luxury but more an affordable necessities. All you need to do is to fill in our enquiry form, or contact us via email or telephone, and a consultant will contact you and will help find the best product for you.
Did we mention you'll receive 20% cash rebate* for your first year's income protection insurance premiums if you apply through Rate Detective?
*This offer is available for all insurance companies that are on our panel. To take advantage of this offer, mention the offer to Rate Detective at the time you submit an enquiry for a quote. When you receive your renewal notice from your insurer, give us a call and we will provide the rebate to you. To be eligible for this offer, your policy needs to remain in force for the full 12 months. Any rebate to which you are entitled will be paid directly into your bank account or provided on a Gift Card.