For many of us, our ability to earn an income is worth 100x more than our car. Yet incredibly, 2 out of 3 Australians insure their car but not their income! This article contains some important tips on how to find the best cover for your needs.
Not All Products are Created Equal
There are many pitfalls you need to be aware of. For example, did you know that:
- There’s no such thing as a one-size-fits-all “best policy”. Which policy is best for you will depend on a number of factors including your age, gender, medical history and the types of cover you are after. Not only that, the landscape shifts every year as insurers adjust their offerings.
- The standard income protection offered through industry super funds only covers you for two years. If you are unable to work for longer than this, you’re out of luck.
- Beware the “no-medical required”, “buy direct and save” style of policy. These are often issued subject to underwriting being done at claim time, rather than when you apply. About a third of claims made on these sorts of policies are ending up in court, and have spawned a new cottage industry in that great charity in the sky, the legal profession. You won’t actually know you’re covered for sure until you try and make a claim.
Getting Value for Money
- Look at the cost of your policy over your lifetime, not just the first year or two. Some insurers offer low premiums initially to entice you to sign up, but then raise them sharply a few years in.
- Putting it off can be costly. Taking out cover earlier may allow you to lock in lower premiums over your lifetime.
- There are tax-effective strategies to make your insurance more affordable.
The Right Advice
Getting the right insurance to protect you and your family is a really important decision.
- The fine-print matters. Different definitions of disability can make a huge difference to your ability to claim. For example, if you’re thinking about having kids one day, some policies will cover you if there are complications with your pregnancy, others won’t.
- If you’re a medical professional, make sure you have needle-stick cover.
- Get your cover in place while you’re young, before things start to go wrong. A whiplash injury from a car accident, or a hand-injury from playing sport before you take out cover can lead to exclusions on your policies, leaving you uninsured against potential future complications that can threaten your career.
- Be honest. When you apply for cover, you will be asked a number of questions by the underwriter, including questions about your medical history. Answer all questions truthfully and disclose any prior conditions or injuries so the underwriter can assess them. Failure to do so may result in a future claims being denied, which completely defeats the purpose of having insurance in the first place! You want to know it will be there when you need it.
For the same reason you wouldn’t ask a barber if you need a hair cut, don’t ask your bank or current insurance company what cover you need. Look for an adviser who is not aligned or affiliated with any of the product providers!