Income Protection Insurance - do I need it?

[Kelpie]

I'm in Australia on a 482 visa for 4 years although I do have a visa agent looking at alternative visa route for my to get my PR.  I saw a financial adviser about getting my super set up and the FA put forward the idea of getting some income protection insurance outside of my super and it was mentioned the premium would be tax deductible. Personally I don't see why I would need it as a) I have no dependents and b) if I lose my job then I wouldn't be able to stay in Australia anyway with my 482...would I?

I get that there is a benefit to having private health insurance because I'd be charged the MLS if I didn't but is there any benefit to someone in my situation having income protection insurance?  I've always said no to FA in the UK who tried to sell me income protection insurance in the past and unless there's a compelling reason not to I'm going to do the same down under.

[Marisawright]

I hope you are not setting up a self-managed super fund.  It's a bad idea on a 482, as it's going to cost you a packet if you end up going back to the UK to live.    

Bear in mind that while there are some excellent financial advisers out there, many of them work on commission, so there's a strong incentive for them to sell you products.  As a single person, it makes sense to have income protection insurance - because if you got sick, , you've got no one else to support you - but I would check what the insurance inside your super fund is like first.  You may find it's adequate.  

Edited September 25, 2020 by Marisawright

[Marisawright]

Also, I suggest doing your own research on super funds.

An independent (fee-based) financial adviser is useful to advise on which super fund to choose, but you do not need anyone to help you "set up" your super.  All you have to do is contact the super fund of your choice, give them your details, and they will give you the information you need to give to your employer.  Done.

On a 482 visa, you would not be wise to consider making any extra payments into your super. Just let the employer pay the minimum.

If your financial adviser was commission-based, then there's a high risk they have recommended a super fund based on their commissions rather than your benefit, so I suggest doing your own research.  If you are on a 482 it's not a hugely important choice, as you won't have much of a balance by the end of the contract, and if you go back to the UK, you'll lose most of it anyway.  And if you make the wrong choice, it is fairly easy to switch super funds (though note, some employers only allow you to switch funds once a year).  

 

Edited September 25, 2020 by Marisawright

[Kelpie]

Based on my experience of financial advisers in the UK I'm very wary of financial advisers full stop.  I'm sure there are some good ones out there but their cards have been marked ever since I got my first mortgage and the financial adviser then tried to load every type of insurance under the sun on to me because I had a budget of £X a month and my mortgages repayments were only going to be £Y so I could "afford it" even if I didn't need it.  Grrrr.  Sorry I digress.

It's not a self managed super and it is one that was chosen with a view to possibly moving back to the UK in 2-4 years time.  I'm also the first employee of my employer's Australian entity so neither of us really know what we're doing and are playing it by ear.  I hadn't really considered the impact of moving to Australia on my retirement planning when I agreed to come over.  In fact I hadn't really considered the financial impact full stop and then along came covid but I still have a job, I'm healthy and I'm possibly in the best part of the world for this pandemic so it's not all doom and gloom.  

The quote for the income protection insurance is $375 a month which sounds very high to me.  I could put that money into account along with the rest of my rainy day fund to see me through any periods of illness plus I have income from another source so I'm leaning towards saying, "thanks but no thanks."

[Andrew from Vista Financial]

On 26/09/2020 at 09:18, Marisawright said:

Also, I suggest doing your own research on super funds.

An independent (fee-based) financial adviser is useful to advise on which super fund to choose, but you do not need anyone to help you "set up" your super.  All you have to do is contact the super fund of your choice, give them your details, and they will give you the information you need to give to your employer.  Done.

On a 482 visa, you would not be wise to consider making any extra payments into your super. Just let the employer pay the minimum.

If your financial adviser was commission-based, then there's a high risk they have recommended a super fund based on their commissions rather than your benefit, so I suggest doing your own research.  If you are on a 482 it's not a hugely important choice, as you won't have much of a balance by the end of the contract, and if you go back to the UK, you'll lose most of it anyway.  And if you make the wrong choice, it is fairly easy to switch super funds (though note, some employers only allow you to switch funds once a year).  

 

All pretty valid points above

Just to let you know though that Australian regulated Financial Advisers are banned from taking commissions on Super and Investments and have been for quite some years, so if providing advice in these areas an upfront fee does have to be disclosed and agreed upon prior to any advice being provided.

 

Regards

Andy

[Ken]

I think you'll find that the approach to Income Protection that the Insurance industry has is that you have to complete a medical questionnaire and possibly take a medical too. If the result of that shows that you might need Income Protection Insurance within the next twenty years then you can't have it. If on the other hand the result shows that you don't need Income Protection then they'll sell it to you.

[Kelpie]

18 minutes ago, Ken said:

I think you'll find that the approach to Income Protection that the Insurance industry has is that you have to complete a medical questionnaire and possibly take a medical too. If the result of that shows that you might need Income Protection Insurance within the next twenty years then you can't have it. If on the other hand the result shows that you don't need Income Protection then they'll sell it to you.

 That is so true 

[Kelpie]

1 hour ago, Andrew from Vista Financial said:

All pretty valid points above

Just to let you know though that Australian regulated Financial Advisers are banned from taking commissions on Super and Investments and have been for quite some years, so if providing advice in these areas an upfront fee does have to be disclosed and agreed upon prior to any advice being provided.

 

Regards

Andy

Thanks Andy. The fees for the super were disclosed upfront. It’s just the income protection insurance I’m struggling with but I think I’d rather just add what I would be paying in premiums to my rainy day fund.