Five things to get advice on before you take life/disability cover.
- 1. What age are you covered until? If you are disabled at 53 and your income protection ceases at 55, the benefits will only be paid out for two years even if you need it until you are 65. It is best to take cover until the normal retirement date of your company fund.
- 2. Own job or any occupation? If you are insured for “any job”, if you can still perform another job, even at a lower income, you may not be paid out. However, “any job” cover is more expensive and may not be necessary depending on your occupation.
- 3. What to declare? If you accidentally forget to provide pertinent information to the insurer it could affect your claim.
- 4. Level- or age-rated premiums? Level premiums tend to be higher when you are younger but do not increase dramatically with age; you effectively pre-fund your cover for your later years. However, if you are saving sufficiently you may need less life cover as you get older so you could benefit from lower age-rated premiums today.
- 5. Capital disability vs income protection for disability cover? Capital disability pays a lump sum amount and generally works best to settle mortgages or other debts on your disablement. Income protection provides monthly income to replace your lost salary and often increases with inflation — this would be most suitable to fund your ongoing living expenses.
Mark Lapedus is the head of retail at Alexander Forbes Life
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