Selecting the right income protection options
- Jeffrey Liu
- Mar 26
- 2 min read
A recent report from iRess highlights a concerning trend among insurers, revealing that some allocate as much as 47% of their Income Protection recommendations to products featuring monthly benefits that decrease to 60%, or even 48%, after a two-year period. This finding is particularly noteworthy as it contrasts sharply with my expectations and the prevailing discussions surrounding the reduction of Income Protection products. For a comprehensive comparison, please refer to the details below.
The disparity in potential benefits can be significant. Below is a straightforward example:
Age of Claim: 40
Income: $120,000
Benefit payable to Age 65 without indexation:
A product that pays 70% continuously to Age 65: $2,100,000
A product that decreases to 60% after two years: $1,824,000
A product that decreases to 47% after two years: $1,465,200
Only insuring 60% of the income: $1,800,000
It is likely that many individuals would find it difficult to manage a 30% reduction in income, let alone a 40% or 53% decrease. For those who can sustain themselves on 60%, there remains the option to establish the monthly benefit at that level from the outset.
Notably, every insurer in the market offers a product that provides 70% coverage through to Age 65. The following is a list of these offerings:
Zurich Income Safeguard (Zurich offers a single Income Protection policy, with benefits that do not decrease)
OnePath Income Secure (OnePath also provides one Income Protection policy, without a decrease in benefits)
AIA IP Core (Flat 70%)
ClearView Income Protection Flex (IP 70) Cover
Encompass Income Protection Cover
MetLife Income Cover
MLC Income Assure
NEOS Income Support (with Extended Care option)
TAL Income Protection Extend
In conclusion, the iRess report highlights a significant concern in the Income Protection insurance sector. Consumers must carefully evaluate these options to select policies that provide comprehensive coverage and ensure financial stability in unforeseen circumstances.
Comments