Tag Archives: inflation

Income Insurance

Income insurance is also known as permanent health insurance. If you are unable to work due to illness or disability, this income insurance is designed to pay you to replace a portion of your lost monthly earnings.

It is your choice regarding how much protection you buy. It is possible to be provided with a tax-free monthly income between 50 and 60% of your usual income. This amount continues to be paid to you until you return to work or retire.

The payout period is usually limited to 5 years. For people who are self-employed, this is considered essential.   A self-employed person would not have sufficient to live on if ill-health or an accident deprived him or her of a monthly income. Should the unforeseen occur,  person who is employed would need to know in what way an employer would provide income insurance for them in the way of sick pay or retirement benefits.

The term “unable to work” varies from policy to policy. It could mean:

You cannot do your job;

A job that you are qualified to do is beyond you;

An inability to do any kind of paid work;

Some policies also make a partial or rehabilitation payment if you are able to return to your old job.  This is in a reduced capacity – for example, part-time.

If you go back to work full time but take a lower paid job, there are policies which will make a proportionate payment to top up your earnings.

WHAT IS NOT COVERED

If you are receiving a full salary, you will not be paid income insurance from a policy. You would have to be off work for at least four weeks (deferred period) before you are paid. You may choose a longer deferred period (up to 52 weeks.)  This therefore will reduce the cost of the insurance premium. If you are employed, your employer may offer you sick pay for a certain period of time. In this case, it may be wise to choose a deferred period of a similar length of time.

If you take part in dangerous sports or other health-threatening activities which you do not disclose at the time of taking out the policy, you will not have cover.

Any form of self-inflicted injury.

Drug and/or alcohol abuse.

Childbirth or pregnancy.

BUYING INCOME PROTECTION INSURANCE

Your age, gender, state of health and your type of work will determine the amount you pay for income insurance.

DECISIONS MADE BY YOU

What amount do you want the policy to pay;

What length of time do you want the policy cover to last;

How long are you prepared to wait before the policy pays out (the deferred period);

Do you want to build increases into the policy cover to cater for inflation.

Insurers differ in their attitudes to risks posed by different jobs therefore policies can vary. As a result of this, it is worthwhile dealing with a broke or independent advisor who specialises in protection insurance. Your particular circumstances should be taken into account on an individual basis.

MAKING A CLAIM

The policy document will inform you when you should tell your insurer that you are ill, and are likely to claim. Your insurer will verify facts with your doctor once your deferred period has ended  Then you should start receiving payments.

Monthly medical certificates will have to be provided by your medical practitioner whilst you are receiving monthly payments.

WHAT YOU SHOULD LOOK FOR IN A GOOD POLICY

Make sure that insurance companies group jobs into classes based on the risk of being able to work. Different classes of work and occupations. For example Class 1 occupations (will have lower premiums) are the lower risk occupations through to Class 4, which are deemed to be higher risk.

Will give you a choice between guaranteed premiums and renewable premiums.

A choice of when the financial underwriting can be done, either when you take out the plan or when you make a claim.

Waiver of premiums should be included automatically.

You should be able to both increase and decrease the benefit amount as your circumstances indicate.

An option to add indexation at any point during the contract.

 

 

 

 

Insurers Cautiously Optimistic on Trump

The President-Elect, Donald Trump stated on his campaign trail that he would lower corporate income taxes. Furthermore, he would lessen regulations giving insurers reasons to be optimistic.

Trumps’s style of governing

Chris Swift, CEO of The Hartford indicated that Trump’s governing style may be comparable to that of Ronald Reagan (Reaganomics). Ronald Reagan, the 40th President of the United States, based his domestic governing method on supply-side economics.

  • Reducing marginal tax rates on income from labor and capital
  • Reducing the growth of government spending

By implementing supply-side economics the political and theoretical foundation was laid for a significant number of tax cuts in the United States.

An individual’s marginal tax estimate is the tax rate he pays. This on an additional dollar of earnings. Insurers are cautiously optimistic on Trump’s policy. As a result it determines the breakdown between taxes, on the one hand, and funds available for own use on the other hand. This is the core of supply-side analysis.

Supply-side analysis directly affects the motivation of citizens. Citizens are motivated to be productive, to save and invest.

The Obama Administration enacted the Dodd-Frank Act in July 2010. This Act offers protection for the consumer. Its main purpose is to avert another major financial crisis. It will take effect in April 2017. Its main premise is that regarding retirement savings, insurers must put their clients’ interests first. As a result, this may slow down the sales of variable annuities.

Donald Trump’s choice for Treasury Secretary – Steven Mnuchin – stated that he would focus on rolling back parts of the landmark Dodd-Frank financial overhaul law enacted in the wake of the financial crisis of 2008. He said that Dodd-Frank was way too complicated and cuts back lending. Trump said that he would like to repeal the Dodd-Frank Act. The banking system has also been shouting out for the repeal of this act.

Variable Annuities

A variable annuity is a contract between you and insurers, under which the insurance company agrees to make periodic payments to you. This could be immediately or at some future date. The manner in which you purchase a variable annuity is either by making one single contribution or a series of purchase payments.

The Typical American Couple

When American companies began switching from traditional pensions to self-directed 402 (k) – like plans in the 1980s and 1990s, it was supposed to lead to a golden age of insured retirement security.

No longer would workers be at the mercy of the company’s generosity. The solvency of Social Security would not be of importance. Workers themselves would be responsible for saving enough for a comfortable retirement.

Thirty years later, the results are in. The median working age couple has saved only $5000 for their retirement, according to analysis of the Federal Reserve’s 2013 Survey of Consumer Finances. The do-it-yourself pension system is a disaster. Seventy per cent of couples have less than $50 000 saved.

Even those on the cusp of retirement- the median couple in their late 50s or early 60s has saved only $17 000 in a retirement savings account.