Thursday, May 30, 2019
Cancelled my Income Protection Insurance
Unisuper are raising the cost of income protection insurance by 43%. I can't see why I am paying for this insurance any more, and, so, I cancelled it. That's AUD 2,400 more a year that will be going into my superannuation account. I kept the death and disablement insurance as it costs much less, though I'm not 100% sure that I should be paying for that either. The death insurance pays out AUD 1/4 million and costs about AUD 50 a month.
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I'm also evaluating whether or not IP insurance is still worthwhile as the premiums go up while the maximum possible payout decreases as we approach 65. At the moment I'm still retaining mine, as the premiums aren't too high (due to having a two year waiting period) and are tax deductible (did you allow for the tax deduction when calculating the net cash flow effect of dropping the cover?). Although I could afford to retire immediately (so don't really *need* IP insurance), I still have to look at the potential loss of income until age 65, as that is the period the IP insurance would cover. Given that we have a higher risk of suffering a career-ending health condition as we approach 65 it is probably still worthwhile overall, even as it gets more expensive. At a certain age the premiums start to decline as the maximum liability reduces as you approve age 65... the unisuper website states that IP insurance with 90-day waiting period and cover to age 65 is $153.28 per $433/mo of cover for age 58-60, but then reduces to $71.95 for ages 61-63 and $38.29 at age 64. So I can't imagine why you're premiums would have increased by 43% unless you salary has increased by a similar amount?
All premiums were increased by 43% going forward. I didn't realise it would get cheaper as I get older. Yes, it isn't taxed and the super contribution actually will be taxed quite heavily as with the high public sector contributions I am over the concessional cap. But my understanding was that it is for a temporary loss of income rather than a career ending health condition. I also could afford to retire if we keep our spending under control.
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