Currently many Australians are looking at working beyond age 60 and 65.  The rational is different for each individual. Some people do not want to retire and wish to keep working forever whilst others may not have enough capital to commence retirement at age 65.

Most income protection policies have a benefit period to age 65.  This means that the policy will expire upon turning 64 years of age.  This can leave individuals exposed if they wish to continue working in the event they suffer an illness, injury or accident prior to retirement.

Some policies allow you to extend your income protection policy benefit period beyond age 65 provided you continue working.  This feature is commonly referred to as a “continuation option”.

Typically with the “continuation option” you will be able to get a new benefit period for an extra 2 years which will allow you to have continuous cover whilst working beyond age 65.  It’s an important feature and not all policies offer this type of option so it’s a good idea to review your own policy.

In recent years life companies have started to offer benefit periods to age 70 for white collar occupations.  This is a reflection of the changing landscape with retirement in Australia and the greater need for people to have longer benefit periods due to the fact people are now looking to work longer.

Example

A 60 year old, professional earning $150,000 of gross income is on long term claim for the rest of their life due to illness or injury.  The table below highlights the impact of different benefit periods.

Income Protection Benefit Period

Cumulative Insured Benefit

Benefit Period to Age 65

$765,215

Benefit period to Age 70

$1,598,264

Extra Benefit

$833,049

Assumptions – 5% indexation of salary, insured benefit is 75% of gross income.

If you are considering working longer and retiring after age 60 please contact me for a review of your existing income protection policy.

Please contact Tim Ward on (07) 3833 3999 or email tim@fwo.net.au