Income Protection

[zhihaojason]

Hello guys,

I am looking to start sharing sessions to share about how Income Protection plans can help enhance your current portfolio and I would like to have a feel about the current demand or curiosity pertaining to this area of coverage. If anyone is keen, please feel free to share your concerns or questions. Thank you for your help!

 

[limster]

If I predict that my future income will be 1million, can I buy income protection in case I don't hit my target income?

So in 20 years time, if my income is only $50,000, the policy will give me $950,000 as income protection? Would Warren Buffet be interested? In some years Berkshire may not do well, so he may need 'income protection' to tide him over during those years.

Anyway, its another AGENT, get the popcorn.

 

[ston12345]

^ hahahaha.

If you haven't already noticed, this forum has pretty adverse reactions to any form of investment-linked insurance policies. But if you're willing to be upfront on the t&cs, comms, returns, projections etc, we might be willing to hear you out!

 

[wts2013]

Hello guys,

I am looking to start sharing sessions to share about how Income Protection plans can help enhance your current portfolio and I would like to have a feel about the current demand or curiosity pertaining to this area of coverage. If anyone is keen, please feel free to share your concerns or questions. Thank you for your help!

hahaha, pls explain what u mean by income protection, before imaginations, comments, etc run wild, hahaha

Are you refering to "insurance plans which provides a monthly payout to replace the income you’ve lost, if disabled or unable to work from accident or illness. The maximum amount you can insure yourself for is typically capped at 75% of your salary."

Why do u think there is a need for it?

Pls start the ball rolling, so feedback would be more focused lah,

hahaha

 

[w1rbelw1nd]

Sounds like a disability income insurance. Nothing bad about it. I got one already

 

[focus1974]

TS,

Please share what you know about income protection here..
a brief summary woudl be good enough thanksa

 

[oceanicmanta]

^ hahahaha.

If you haven't already noticed, this forum has pretty adverse reactions to any form of investment-linked insurance policies. But if you're willing to be upfront on the t&cs, comms, returns, projections etc, we might be willing to hear you out!

or just simply be upfront if you are an agent. more respected that way I feel

 

[zhihaojason]

Hello guys, sorry I've been swamped with work recently. Thank you for your various replies and sorry that I wasn't too clear about what I asked! I will address the replies one by one. I'm not very familiar with forums so please pardon me.

Limster- If there is a plan like what you mentioned, I will buy also haha. Basically income protection is to protect your income in the event of a disability or illness that prevents you to perform your duties at work. It acts like a safety buoy and the amount that you can insure for is up to 75% of your income. And yes, I am an agent but I'm not here to generate sales unless you guys are interested we can talk privately. I genuinely want to raise awareness about such coverage because I think it is too important to be neglected.

ston12345- the plan itself has no cash value component so there's not projections etc. It is a pure term insurance that you can be insured up to Age 65. T&C in general is if you are unable to work due to disabilities or illness, you can claim after a certain waiting period depending on which you opt for, for my side is up to 180 days. Comm wise is 2x of the paying years so up to 50% for the first year.

wts2013- Yes I am referring to 'Insurance plans which provides a monthly payout to replace the income you’ve lost, if disabled or unable to work from accident or illness. The maximum amount you can insure yourself for is typically capped at 75% of your salary.' Sorry I haven't been very clear about what I want to share.

I think that this plan is very essential to anyone who is generating income because of various reasons. I will share a few as food for thought.

1) It helps us maintain our ongoing quality of life. In the event of an unfortunate event, we will still want to be assured of our finances or rather, we will want to hold even tighter to our finances. Such plans give us that kind of guarantee to a majority extent.

2) It provide a piece of mind for ourselves and our family. Even if you are not able to work, you will not want your family to have a drastic change of lifestyle. Income protection can help ensure that your family is still being taken care of.

3) Income protection ensures that you can keep up with your bills, mortgages and of course insurance premium. While being unable to work, the last thing we want to get into is bad debts and being chased after by bills. If insurance premium are not paid, there will be a chance that policies will lapse and it will be a really waste of money.

4) Just one more for thoughts, even our car which is technically a depreciating asset we also buy insurance for it, so why do you not insure your income which is an APPRECIATING asset?

focus1974- Income protection helps to ensure that in the event of illness or disabilities that you are not able to perform your duties at work, you can get a monthly benefit up to 75% of your last drawn pay. (Subjected to changes if your salary has adjustments from when you buy the plan)

oceanicmanta- Yes as per mentioned, I am an insurance agent. =)

Thank you once again for your generous replies. If still in doubt or if I have not addressed your question, please feel free to let me know.

 

[limster]

Why not work out the cost and projected benefits of your income protection policy and compare it to a term policy with critical illness that the same insurer is offering.

Somehow I think that term policy with critical illness is cheaper and has lower profit margin and lower commissions for agents. (if term policy with CI has higher commissions, you would be advertising it instead of income protection policy).

 

[Perisher]

Yup, perhaps do a pros and cons comparison with the same premium paid for this income protection plan vs a term policy with CI, TPD, Death.

 

[K|muRa^84]

TPD shld have a narrower definition ?

 

[Perisher]

TPD shld have a narrower definition ?

You mean income protection's definition of accident or disability?
If it's disability should be same as TPD?

 

[mummy1234]

I got a partial disability or income protection plan 7 yrs ago with Manulife. 10 yr renewable and pays 70k a yr for 5 yrs in case of partial disability.....on hindsight should have gotten the Great Eastern one which has payouts for life. Premiums rise every 10 years too. I agree it is an imptand overlooked insurance...it is different from tpd and ci as well.

 

[limster]

I got a partial disability or income protection plan 7 yrs ago with Manulife. 10 yr renewable and pays 70k a yr for 5 yrs in case of partial disability.....on hindsight should have gotten the Great Eastern one which has payouts for life. Premiums rise every 10 years too. I agree it is an imptand overlooked insurance...it is different from tpd and ci as well.

From your post, the only difference is that you probably pay more premiums for for lower coverage. But we'll wait for the agent to post the premiums/projections for term vs income protection and do the calculations from there.

Whenever you are offered 'annuity' or 'lump sum' and both are not taxable income, choose the 'lump sum' because the 'annuity' option is calculated on the basis of the most conservative rate of return and a 'service charge' is added for the privilege of the insurer paying you in instalments.

Let's say you bought a term policy and you are allowed to claim on the term policy. If the agent came to you and asked you to convert the lump sum from your term policy into an 'annuity' most people who BTIR would run far, far away.

Again, this illustrates the flexibility of Term. You can collect the whole lump sum and then decide whether you want to put the lump sum into an annuity. Income protection, you are forced to take annuity.

 

[w1rbelw1nd]

Disability income plans and tpd+ CI plans are two different things altogether, even though in terms of payouts there might be overlap.

What I don't like about these plans is that it cannot realistically take into account loss of promotional chances etc in the case of working at a reduced capacity.

In my workplace, there is an engineer who has some visual problems that is like some strange form of astigmatism. He needs some special software to see what's on a laptop screen. While the company still values him enough to work out a job scope that is suitable for him, but what is his payout for such a plan? Nothing.

 

[K|muRa^84]

You mean income protection's definition of accident or disability?
If it's disability should be same as TPD?

Ok, I've checked.

Definition of TPD under DPI term policy:

1TPD means any of two situations:

1) The Life Assured, due to accident or sickness, is disabled to such an extent as to be rendered totally unable to engage in any occupation, business or activity for income, remuneration or profit; and the disability must continue uninterrupted for at least 6 consecutive months from the time when the disability started; and the disability must, in the view of a medical examiner appointed by the company, be deemed permanent with no possibility of improvement in the foreseeable future
.
2) The Life Assured, due to accident or sickness, suffers total and irrecoverable loss of use of:
(a) the entire sight in both eyes; or
(b) any two limbs at or above the wrist or ankle; or
(c) the entire sight in one eye and any one limb at or above the wrist or ankle.

Definition of Disability under GE PayAssure:

"Working Disability" means in a Working Period or the first 180 days of a Non-Working Period, the Life Assured is totally unable by reason of sickness or injury to perform the Material Duties of Life Assured's Own Occupation

"Material Duties" means the main tasks and duties which are required for the purposes of a paid occupation and which cannot be modified or omitted without affecting the Life Assured's ability to perform that occupation

 

[zhihaojason]

Hello guys, thank your for raising questions and sharing thoughts.

I have worked out the cost of an Income Protection Plan vs a Term policy with Critical Illness but both plans are different in terms of how it can be claimed and coverage so please take this as an illustration.

[Income Protection]Based on ANB 30, Salesman non-smoker, Occupation Class 2:
Monthly Benefit: $3,000
Pre-Benefit Period: 90 Days
Payable and Premium Term: 35 years
Benefit Payment Period: Up to Age 65 years
Annual Premium: $736.50
Total Premium paid: $25,777.50

[Term policy with Critical Illness]
Sum Assured: $150,000
Payable and Premium Term: 35 years
Annual Premium: $733.50
Total Premium paid: $25,672.50

The coverage and payout definition for both plans are different therefore there can be no apple to apple comparison. I'm not saying that Income Protection is more superior than other form of insurances out there but it is an additional area that you should consider.

 

[Perisher]

Hello guys, thank your for raising questions and sharing thoughts.

I have worked out the cost of an Income Protection Plan vs a Term policy with Critical Illness but both plans are different in terms of how it can be claimed and coverage so please take this as an illustration.

[Income Protection]Based on ANB 30, Salesman non-smoker, Occupation Class 2:
Monthly Benefit: $3,000
Pre-Benefit Period: 90 Days
Payable and Premium Term: 35 years
Benefit Payment Period: Up to Age 65 years
Annual Premium: $736.50
Total Premium paid: $25,777.50

[Term policy with Critical Illness]
Sum Assured: $150,000
Payable and Premium Term: 35 years
Annual Premium: $733.50
Total Premium paid: $25,672.50

The coverage and payout definition for both plans are different therefore there can be no apple to apple comparison. I'm not saying that Income Protection is more superior than other form of insurances out there but it is an additional area that you should consider.

They both cover TPD, Death and CI? Their total premium is about the same too and the premium term is the same. If having a difference in the way they payout is the only difference then it make for a comparison no?
In other words, if everything is the same, what is there to compare?

In this instance is their only major differences in the way they payout? That is, one pays out 1 shot $150k while the other pays $3k/mth till 65?
According to calculation, $150k at 3k a month can last 50 month while the $3k/mth will depend on how old you are until 65.
I think this made Income protection better than term plan since it last more than 50mth if you tio anything before 61.
The lump sum can help but will run out fast if not prudent.

What is pre-benefit period?

What other differences is there?
What's the catch?
Anyone spotted anything I missed out?

 

[ktyandkyc]

I would like to ask whether what constitutes the inability to work?

If one gets early stage cancer, and because of the treatments that he has to undertake and he choose not to work, will DI payout accordingly?

What makes it more superior than taking a 2nd term plan, or taking an additional rider for early CI for additional coverage, other than what Perisher has pointed out that '$150k at 3k a month can last 50 month while the $3k/mth will depend on how old you are until 65.'