subject: Top Tips About Income Protection [print this page] Income Protection is one of the most important forms of personal insurance. It provides income at a time when you are not able to physically work to generate income.
We have summarised 3 actual client situations which demonstrate how income protection policies can be undervalued by people.
Case Studies
1. Couldn't see the value in his income protection.
Tom aged 42, had an accident involving a knife in his kitchen while preparing lunch which put him in hospital initially for 2 weeks.
As a self employed landscape gardener he was unable to do any work while his leg was healing.
He had another set back which saw him go back into hospital for another operation.
This freak accident cost Tom 4 months with NO income.
When Tom called to make the claim on his income protection, he said "I was going to cancel this policy last year because I thought it was a waste of time - I am now so thankful that I didn't".
Tom claimed on his income protection policy which ended up paying him for 3 months.
The simple message is income protection for the self employed is very valuable.
2. Going to cancel policy - unable to afford the premiums.
Darryl called our office one morning in quite a distressed state.
He explained that he could no longer afford his income protection policy and wished to cancel it. I was familiar with his policy benefits, occupation, earnings etc and was somewhat perplexed that he was contemplating cancelling his policy. I broadly discussed Darryl's situation with him and suggested that we put in a claim for income protection as he was in my view eligible to claim.
I informed Darryl that he should have called me before using up his annual leave and that if he was in the care of a doctor (due to stress), and not working that we should submit a claim with the insurer.
Darryl went immediately on claim and was on claim for nearly a year (receiving over $50k of benefits) and his premiums were waived whilst he was on claim.
The simple message is that if you have a policy talk to your adviser before doing anything in haste.
3. Claiming a tax deduction for income protection premiums.
Katrina is a long standing client of our business and despite being involved in the accounting/finance area had forgotten to claim her income protection premiums as a deduction against her personal income.
When conducting her annual review and despite annual correspondence from the particular insurer, we found that Katrina had omitted to claim this particular item over a number of tax years.
We contacted the relevant insurer and gained premium data for each year for Katrina and she submitted an amended tax return for the previous 5 years and received a handsome tax refund.
The simple message is to take advantager of the tax deductibility of some elements of insurance. Keep good personal records.
Simple Messages
-Make sure that your benefit reflects your current earnings position. -If you are unsure about the benefits - talk to your adviser. -Keeping current financial records is important.
Remember an income protection policy is NOT set and forget!
