Inspiration for my blog this week came from a Specialist working for Queensland Health who is not particularly keen on insurance and happy to rely on the Income Protection cover provided through his Q Super fund.
Whilst this might seem sensible providing you can live on a taxable income of 75% of your base pay, have no pre-existing medical conditions which could cause problems at claim time and understand your benefit ceases after 2 years there were other areas to consider for this particular client.
My client had accumulated significant sick leave which you might think was a positive. Unfortunately, as his Q Super policy requires that accumulated sick leave is exhausted prior to the 14 day wait period, his Q Health income protection policy effectively became a 90 day wait policy. A quick comparison quote showed a 90 day wait / 2 year benefit period policy without the limitations of Q Super was significantly cheaper!
This got me to thinking. If you are a specialist working for Q health earning in excess of $300kpa and paying 30% contributions tax on your concessional contributions what is the true cost of your income protection through Q Super, given premiums would be deductible to you outside of super? You need to divide the Q Super premium by 0.7 to provide the comparison thereby turning a $1,000 premium outside of super into a $1,428 premium inside super.
My client was also thinking about moving into private practice shortly so of course his Q Super Income Protection cover would cease then anyway. A real risk given one’s health can change at any time making medical underwriting more difficult but that’s another story.
|Tags: News Tax|
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