How you can save on Income Protection

Have you found taking out income protection too expensive or are your premiums becoming unaffordable? We have come up with eight ways you can reduce your premiums to help make them more affordable:

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number-1Increase your waiting period

The waiting period is the amount of time you will need to wait once becoming totally disabled before your monthly benefit will begin.

The shorter your waiting period is, the higher your premium will be as the less severe an illness or accident needs be in order for you to start receiving a benefit.

By increasing the waiting period, you could potentially save over 20%. However you must be mindful of the impact a shorter waiting period can have on your policy.

Things to consider when choosing your waiting period include:

  • How long you can afford go without receiving an income
  • Any savings you have
  • Leave entitlements available including sick, annual and long service leave
  • If you are self employed

30 day Waiting Period vs 60 Day waiting Period

Annual SalaryMonthly Benefit30 Day Waiting Period60 Day Waiting PeriodSaving
$150,000$9375.00$98.36$76.6722%
$100,000$6250.00$68.08$53.3822%
$85,000$5312.50$58.99$46.3922%
$60,000$4062.50$49.83$38.7322%

Please note while premiums are based on actuals, they are examples only and may not be indicative of actual premiums available.

number-2Decrease your benefit period

The benefit period is the amount of time you will receive your monthly benefit for if you suffer a sickness or injury and are unable to work for longer than your waiting period.

The longer your benefit period is, the higher your premiums will be as you will be eligible to receive a monthly benefit for longer. A shorter benefit period also means the maximum benefit you can receive is reduced.

By reducing your benefit period, you can potentially save over 25%.

Annual SalaryMonthly Benefit1 Year Benefit Period2 Year Benefit PeriodTo Age 55 Benefit PeriodTo Age 65 Benefit Period
$150,000$9375.00$70.74$68.09$96.91$98.36
$100,000$6250.00$46.91$47.67$81.13$82.74
$85,000$5312.50$43.27$47.06$58.26$58.99
$60,000$4062.50$34.82$37.32$49.50$50.61

Please note while premiums are based on actuals, they are examples only and may not be indicative of actual premiums available.

number-3Remove Inflation Protection

Inflation Protection or Benefit Indexation is generally automatically applied to your policy to protect it from increases in inflation.

When applied. your insured amount will increase each year on your policy renewal date by either a set percentage or the rise in the Consumer Price Index (CPI).

You can opt out of the increase if you wish, allowing you to save on your premiums. You can choose to opt out once or permanently.

number-4Only cover what you need

When taking out income protection, you should make sure you are covered for your needs – having too little or too much cover may not be adequate.

While income protection generally covers up to 75% of your salary, if you do not need this amount, you may want to reduce your level of cover.

SalaryPercentage of salary coveredMonthly BenefitMonthly Premium
$100,00075%$6,250$68.08
$100,00070%$5,833$64.04
$100,00060%$5,416$60.00

Please note while premiums are based on actuals, they are examples only and may not be indicative of actual premiums available.

number-5Compare Quotes

It’s important to compare quotes from a range of insurers. We compare some of the leading insurers in Australia and can provide you with a detailed report for each of those insurers.

InsurerMonthly BenefitMonthly Premium
Insurer 1$6,250$68.08
Insurer 2$6,250$68.76
Insurer 3$6,250$72.72
Insurer 4$6,250$73.31

Please note while premiums are based on actuals, they are examples only and may not be indicative of actual premiums available. Premiums are based on a 30 day waiting period and white collar profession.

number-6Quit Smoking

Smokers typically pay more for insurance compared non-smokers, due the increased health risks associated with smoking.

If you are a smoker you may be able save on your premiums by quitting smoking. In some cases, if you have stopped smoking for 12 months, including not using quitting aides such as nicotine patches or gums, you may be able to get your premiums reduced.

InsurerMonthly BenefitMonthly Premium for SmokersMonthly Premium for non-smokersSaving
Insurer 1$6,250$83.22$68.0818%
Insurer 2$6,250$89.06$72.7218%
Insurer 3$6,250$92.43$74.0420%
Insurer 4$6,250$92.52$75.0119%

Please note while premiums are based on actuals, they are examples only and may not be indicative of actual premiums available.

number-7Take cover out early

Generally the younger you are when you take out cover, the cheaper your premiums will be as in most cases insurance costs increase as you age. You are also less likely have serious medical conditions when you are younger, which can impact on the cost of cover.

AgeMonthly BenefitMonthly Premium
25$6,250$53.72
30$6,250$57.15
35$6,250$68.08
40$6,250$88.54
45$6,250$122.21
50$6,250$176.15

Please note while premiums are based on actuals, they are examples only and may not be indicative of actual premiums available.

number-8Remove Unnecessary Options

Income Protection comes with a number of options which are designed to customise and enhance your policy. However these do cost extra and it is important to balance affordability with enhanced cover.

InsurerMonthly BenefitMonthly Premium with OptionsMonthly Premium without OptionsSaving
Insurer 1$6,250$93.84$68.0818%
Insurer 2$6,250$96.01$68.7621%
Insurer 3$6,250$99.00$72.7218%
Insurer 4$6,250$99.55$73.3118%

Options included Accident Benefit and Claims Escalation.

Please remember that price is not the only factor when deciding on insurance. It is always important to read the relevant Product Disclosure Statement to find out what features and benefits are offered and to take into account your own personal circumstances.You should obtain advice before you act on this information or make any decision about your personal circumstances or your insurance needs.

Published: June 16, 2015

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