**Who wants income protection cover?**

Loss of licence, TPD, loss of income and more.

Would you consider taking out income protection cover:

Yes, I need it now.
7
17%
Yes, as long as the price was right.
24
57%
Yes, but only as a suitable replacement for Loss of Licence cover.
6
14%
Maybe, I need more information (please post a comment!)
4
10%
No, I don’t need it and would not be interested.
1
2%
 
Total votes: 42
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Planner
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**Who wants income protection cover?**

Postby Planner » Mon Jul 1 2013, 05:35

Hi All.

I have been offering our life, total and permanent disability and trauma cover with no loadings and no exclusions for about 12 months and has been popular among forum members as well as fixed wing pilots (especially the ag guys). However, the number one question I always seemed to get asked is “do you offer income protection?”. Unfortunately, no such product exists at this time to my knowledge apart from AFAP MBF type of arrangements.

This has prompted me to start discussions with a major Australian insurance company about developing a product for pilots (rotary and fixed wing) that would cover 75% of your pre-disability income for a pre-determined time period. Indications at present from the insurer are that 2 years or 5 years would be the only benefit period offered but at least this gives you time to consider your options and get finances sorted. The waiting period for the commencement of cover from the date of injury or illness would be chosen by the insured as either 30 days, 60 days, 90 days, 180 days or 720 days.

The cover that I am proposing to the product developers would have to be something that is a genuine replacement for Loss of Licence. This would mean that funds currently being directed towards LoL cover could be re-directed to this new income protection package. Further, after having read the terms and conditions of LoL cover currently offered by a major insurer, the exclusions that apply to that cover would not apply to the proposed income protection cover (such as no claims for pre-exisitng injuries/illnesses, mental health issues, drug and alcohol related injuries/illnesses, etc.).

Another feature of any product that may arise from this exercise would be the ability to meet the cost of premiums via superannuation. This will mean that you do not need to use your personal cash flow to meet the cost of cover but your super guarantee or super salary sacrifice can be used to meet the ongoing premiums. Alternatively, it can be paid out of personal cash flow and a tax deduction can be obtained for the premiums (much like LoL cover).

The outcomes of my initial meeting with product development included getting an idea of potential popularity of such a cover among the aviation industry. While my experiences of the recent past indicate that it should be well received I really need to be able to back this up with some research. Therefore, with kind permission from Bladeslapper, I am posting a poll to try and get some raw market research in the hope that I can push this product development to the next stage. Of course, please also leave comments that may be useful and I will provide these as feedback as well (such as essential features or general questions about the proposed cover).

If you have taken the time to read this post then please take an extra minute to participate in the poll below. The feedback will go a long way to getting a fair deal for your industry and could provide you with more choices for your personal insurance.

Thanks for your input and really appreciate your time,
Planner.
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Eric Hunt
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Re: **Who wants income protection cover?**

Postby Eric Hunt » Mon Jul 1 2013, 08:27

A bit confused by the wording:

" the exclusions that apply to that cover would not apply to the proposed income protection cover (such as no claims for pre-exisitng injuries/illnesses, mental health issues, drug and alcohol related injuries/illnesses, etc.). "

Does this mean that under your proposed policy, we are allowed to have the pre-exisitng injuries/illnesses, mental health issues, drug and alcohol related injuries/illnesses?

A professional flying instructor, by definition, has a mental illness and usually an alcohol problem. Just wanna make sure that me and my boozy mates are covered.
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Planner
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Re: **Who wants income protection cover?**

Postby Planner » Mon Jul 1 2013, 11:31

In a way, you and your boozy mates could well be covered!

Any cover that is not subject to full underwriting will always have heavy exclusions. The cover we offer is fully underwritten which means that you will need to complete a health questionnaire to determine if you have any pre-existing injuries/illnesses. As long as these ailments are disclosed and not life threatening, chances are you will be accepted for cover without any exclusions or loadings. An example of a pre-existing illness might be asthma, mental health issues, high blood pressure, high cholesterol, back pain/injuries, arthritis, etc. These issues, if under control, will usually not be a problem with the insurer (however if you had several of them then they may need to reconsider!).

With life insurances (Life, TPD, Trauma, Income protection) if they are not fully underwritten then the above pre-existing injuries/illnesses will not be covered. A classic example of this is the cover constantly advertised on daytime TV. No underwriting equals heavy exclusions. These covers will also generally have a blanket exclusion for mental health as this is now the number one reason for claim. Bad backs are a distant second. I deal with clients with this type of cover on a regular basis and they will generally have a mental illness exclusion, exclusion if you are injured doing something illegal (yes, that should be covered!) and sometimes an exclusion if you are injured at work or contract an illness that may be contributed to by your work environment. All that and these insurers charge 30% to 50% more than the market rate!

Hope this clears up any confusion.
BenThomas
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Re: **Who wants income protection cover?**

Postby BenThomas » Mon Jul 1 2013, 11:48

Eric Hunt wrote:A professional flying instructor, by definition, has a mental illness and usually an alcohol problem. Just wanna make sure that me and my boozy mates are covered.


Amen
KNOW NUFFEN
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Re: **Who wants income protection cover?**

Postby KNOW NUFFEN » Tue Jul 2 2013, 01:17

"Planner "
Sorry to steal your limelight , future commissions and sponsorship of bladeslapper but most companies don't offer income protection for helicopter pilots due to
1/ the risk to them is too high insuring helicopter pilots.

Vic Super is one such reputable company that does offer income protection cover to any one ( even Pilots !!!!) automatically up to $3,000 per month cover( called 6 units of cover with a 90 day wait and a benefit period of 2 years) without underwriting and 4 units of Death and TPD cover again with underwriting or medicals etc .To get this you will need to ask your employer to pay into Vic super for your Super guarantee payment and apply for the insurances you require (maximum default ). Anyone can now join their fund.
Also, look at their Death and TPD rates. ie A 40 year old will pay $208 p.a for $404,000 Death and $404,000 Total and permanent disability cover . Again for all those with a medical issue can join this way without any medicals or underwriting etc under the default options.
Sorry to take your thunder "Planner "( and very high commission rates!!).

( the Legal Bit !!! ( cover your Arse!!!) , This is general inforamtion taken from their website and not specific advice . Refer to their PDS for further information. ie look them up on the web and give them a ring direct for accurate information before asking them to send you out forms if you are applying )

P.S I have no association with Vic super.

Planner wrote:Any cover that is not subject to full underwriting will always have heavy exclusions

Obviously not ,refer above
KN
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Re: **Who wants income protection cover?**

Postby Planner » Tue Jul 2 2013, 04:21

Hi Know Nuffen

Thank you for the post and feedback. I will address your comments in 3 sections:

1. Inherent restrictions of cover in super
Current legislation will allow insurance to be owned by a super fund but this is restricted to Life, TPD and Income protection only (i.e. it is not clever advice to have trauma cover in super fund due to an inability to access these funds from super should you claim, however, it can be done via an SMSF). Trauma cover is by far the insurance that is most claimed upon in my practice but this might be due to the demographic of my clients. It is probably the most useful cover to pilots as it will provide them funds to re-train for another vocation should the illness/injury be severe enough to end in loss of licence.

By having your cover in super you also open yourself to paying tax on the proceeds of claim. For instance life insurance proceeds could be taxed at 31.5% (or even 46.5% in certain circumstances) if it is incorrectly planned (an example is where you have no tax dependants nominated). TPD will almost always be subject to tax unless you are fortunate enough to claim at age 65. I am a fully qualified Chartered Accountant with 17 years small business, tax and audit experience plus 9 years financial services experience so I feel qualified to comment on such matters. I am not just an insurance salesman.

2. VicSuper cover
To access the cover that you have highlighted above, you need to be a VicSuper employee member (which is easy enough to achieve). This will allow you to qualify for the automatic acceptance limits of 4 units of cover for Life/TPD. For your example of a 40 year old you quite rightly point out that they could obtain $404,000 of life/TPD plus $3,000pm (6 units) income protection cover. This cover is fine, it will payout in the event of your death or TPD but it has a major shortcoming. Fast forward to age 45 and you will note that the unit based auto cover will be now $180,000 ($100,000 at age 50). This may now not be appropriate cover if you still have debt and kids. This cover can be increased but you may also note from the VicSuper Insurance Handbook that should you want fixed cover or unit based cover in addition to the default cover, you will need to complete the AMP Personal Statement (i.e. be fully underwritten for health/occupation/past-times). A call to VicSuper also verified this for me.

The Income protection cover provided is also an indemnity policy. This means that they will pay you the lesser of 75% of your pre-disability income from the previous 12 months or your insured monthly benefit amount. This is not favourable if you were unemployed during any part of the previous 12 months (but this hardly ever happens in your industry I am sure). The cover I am trying to develop will pay a guaranteed amount no matter what your previous 12 months income was as long as you can substantiate your level of insured income at the time of application.


3. Commissions
Super funds will not provide you with personal advice without participating in their own in-house financial planning programme (hence the long pre-recorded “general advice” warning whenever you call them). I am unsure of VicSuper’s charges (they are not published) but I know one industry fund that I recommend (the fund, not the advice) charges $2,750pa for their advice. Yes, I am paid a commission and this is always fully disclosed but I also provide my clients with advice regarding the adequate amount of cover to own and the actual ownership structure of the insurance and any other issues that they may want to scope into the Statement of Advice that I must (by law) prepare in the client’s best interests. I do not charge any other fees so this means that the client can get full advice for the price of their insurance premium and no more. This extra advice can be related to super, estate planning, salary packaging, investment, etc. Further, once you are my client I am always happy to take your call to talk generally about your advice requirements and the meter will not be running. On an hourly basis, I am pretty sure the receptionist is paid more than me.

Summary
When I was discussing cover in my second post, I was in my own mind referring to non-underwritten cover external to super. Yes, this was an oversight to not include default super cover and I should have expanded on this. I never recommend a client to cancel or otherwise remove default cover whether it be via VicSuper, Q-Super, Auscoal, First State Super, AMP, MLC, ING or the raft of other employer funds that provide default cover to members at a good price. It is actually against the law to put my clients in a financially worse situation. I am not so desperate for clients that I will intentionally deceive and risk heavy fines or prison time. I apologise if this omission is considered material to forum members.

To paraphrase what was stated in the opening paragraph of the previous post, “not many insurance companies will provide income protection to helicopter pilots because it is considered too risky”. I am trying to get a new product to market that will provide you and your colleagues with a choice to have fully functioning income protection cover inside or outside of super that can replace your need for LoL. I can’t see how this could be a bad thing for your industry?

Know Nuffen, I appreciate the feedback, it is all valuable information that I can take to the product development guys and demonstrate that there is something already on offer in the market. Examples of current cover is good ammunition to create a quality, stand-alone cover that is tailored for your industry.

Apologies for the lengthy post.

Planner
KNOW NUFFEN
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Re: **Who wants income protection cover?**

Postby KNOW NUFFEN » Tue Jul 2 2013, 05:55

Planner.....
Thank goodness you dont charge by the word.

As I said ,Vic super has Income potection cover with no underwriting now.( No poll required to any product manufacturers , development guys or the forces of darkness to try and come up with somnething in the year dot...)
Inside or outside super, the on claim payments from them will still be be taxable.


Planner wrote:On an hourly basis, I am pretty sure the receptionist is paid more than me.


Perhaps its time to learn how to type.


KN
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Planner
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Re: **Who wants income protection cover?**

Postby Planner » Tue Jul 2 2013, 06:12

No worries KN.

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