Premiums are rising at enormous rates. It can be tempting to stop paying them. But how vulnerable does that leave you and any dependents?

Income insurance premiums are rising by more than 70% in the next month or so. It is unreal to think that one jump could be so high. The cause is pointed towards the number and duration of claims, plus low interest rates, which increases the cost of providing cover.

So, do you need it?

If you have dependents or debts, then yes, you absolutely do. The most common cause for Income Insurance claims to one of the leading Australian insurers for men between 26-45 years of age is accident and injury, at a whopping 51.65%. That is more than all other causes combined.

The best way to ensure your premiums remain manageable – and this goes for any type of insurance – is to monitor your premiums and claims, and engage your insurer to cover you for only what is personally relevant. Additionally:

• You may be eligible to claim your income insurance premiums in your income tax deductions. Keep a record and ask your accountant.
• If you are in a position to do so, extend the waiting period on your policy before making a claim. This can reduce your premiums by up to 30%.  For example, change from 30 days to 90 days, and use your sick leave and annual leave for short term periods, and retain your income protection for long term health issues, when it is most important.
• Review your cover period. If you can reduce it, it might be more affordable to balance your cover between Income protection and Total and Permanent Disability (TPD) cover.  New policies today are only 5-year benefit periods, which might be appropriate with other cover.

Many people are covered for Life, Income, Trauma and TPD via their superannuation funds. Depending on your career stage will depend on how regularly you monitor your super. We recommend regular and rigorous review. It will save you money – indeed thousands of dollars – in the short term, but more importantly, protect you if the unthinkable should happen.

Health insurance premiums will rise in April too. A simple phone call to your provider to check what you’re covered for and if there is a product that is better suited to your needs can drastically reduce your premiums.

Many of us know someone who has had a horror experience with insurance – a situation where they thought they were covered, and then weren’t. The distress for individuals and their loved ones is heartbreaking. Our preferred strategy is prevention, not cure.

AdviceCo’s Financial Services Team provide personalised advice on insurance and financial protection. If this topic is of concern to you or raises any questions, feel free to contact Christine Hallowes to make a complimentary initial meeting.

General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.