7 Objections to income protection
Your clients work hard to create their own lifestyle, and maintaining it takes time and effort. If they were to lose that "certainty" what plans do they have in place?
Taking out a protection plan, and maintaining it, can help your clients and their loved ones to negotiate life's curveballs.
However, many people have various objections, particularly with income protection. Different stages in their lives, the mindset of "it won’t happen to me", or not fully understanding the implications of not receiving an income would have on them and their loved ones.
Objection 1 - Income protection is too expensive.
Income is an important asset. For many people, they know what they are getting week in, week out. Others have to rely on varying income due to occupation or work hours. Income is used to plan for a night out, a weekly shop, paying for your child’s education or buying a house.
As with many purchases, there are ways to save money on your policy. Some examples are:
- income protection premium outside of superannuation may be tax deductible
- not being a smoker or quitting, may lead to lower premiums
- increasing waiting period
- reducing benefit period
- with CommInsure, if your client bundles policies, it may lead to policy fee waivers or
- paying annually will also provide a decrease in charges.
Objection 2 - I have income protection insurance through my super fund.
Some considerations about income protection insurance inside superannuation:
- Income protection premium inside superannuation is not generally tax deductible.
- How quickly would you receive a monthly benefit? It can sometimes take longer to receive monthly benefit payments as they first have to be approved by the Trustee.
- Is the waiting and benefit period on your income protection adequate? Income protection benefits in super sometimes only lasts two years. Consider a separate income protection policy with a waiting period of two years and a longer benefit period.
- Insurance inside superannuation can erode your retirement savings.
- Your clients should also consider the proposed changes to insurance within superannuation – read more.
Note: Under some circumstances, in older policies, the benefit may be trapped in super until the release criteria are satisfied.
Objection 3 - I don't need income protection because I don't have dependants or many debts.
Situations vary. Your client may have paid off their debts, they might not have any dependant children, or not at this stage in their life, however these circumstances may change. If something were to happen to your client, will they have the necessary savings to help pay for medical expenses and maintain their current living standards?
There is a common misconception that those with private health insurance are covered for the costs of doctors, hospitals, tests etc. However, this is not always the case, as private health insurance may cover part of the costs of specialists, hospital and tests but not all. For example, an MRI in many cases is an out of pocket expense. Having income protection can help your clients pay for these costs.
There is also the belief that someone who is injured will receive government support, and while this may be true, are your clients eligible and is the amount paid enough for your clients to live without making too many changes. For example, the maximum Disability Support Pension for your client if they are a single person 21 or over, with or without children, or under 21 with children, is $834.40 fortnightly1.
Objection 4 - I'm healthy, I don't need income protection.
Health shouldn't be taken for granted. Unfortunately, illness and accidents do happen and having a plan in place is important. Being healthy is the perfect time to take out insurance - premiums may be cheaper, and there may be less underwriting required. As your clients age, their health may decline which in turn can increase premiums, result in restrictions to cover or worse, they may be ineligible for cover.
Objection 5 - I'm too young to consider income protection.
As mentioned above, illness and accidents happen, regardless of age. Many health issues such as heart attacks, strokes and cancer are often associated with people who are older, however the reality is that these health issues don't discriminate. For example, in 2018, it is estimated that there will be 138,321 new cancer cases diagnosed2.
Objection 6 - If I get sick, I will just lodge a workers compensation claim.
Workers compensation may not cover you for everything. Did you know:
- Sole traders and partnerships are not eligible for workers compensation coverage.
- Workers' compensation does not cover non-work related illness or injury.
- Workers compensation varies state to state. For example, in NSW, payments will stop after 130 weeks unless:
- You have been assessed and have no current work capacity, and this is likely to continue indefinitely, or
- You're working at least 15 hours per week and earning at least $190 per week (indexed annually), and this is likely to continue indefinitely, and
- You have completed an application for continued weekly payments after 130 weeks and sent it to the insurer3.
NOTE: payments will cease after 5 years unless your level of permanent impairment is more than 20 per cent3.
CommInsure's income protection may replace up to 75 per cent of your client's income if they are unable to work due to sickness or injury.
Objection 7 - People never get use out of their income protection.
We are in the business of paying claims, and pay all genuine claims as soon as possible.
In 2017, CommInsure paid more than $1 billion in claims. That's over $20 million in claims paid on average each week. We paid these claims under our Retail, Direct and Group insurance policies.
Of these claims, we paid 13,688 income protection claims, totalling $270 million in payments. See our claims paid flyer.
1. https://www.humanservices.gov.au/individuals/services/centrelink/disability-support-pension/payments/payment-rates - viewed as at October 2018
2. https://canceraustralia.gov.au/affected-cancer/what-cancer/cancer-australia-statistics - viewed as at October 2018
3. https://www.sira.nsw.gov.au/claiming-compensation/workers-compensation-claims/weekly-payments - viewed as at October 2018