Paul Simpson

By Paul Simpson.

Many times during my years as a Financial Planner specialising in Risk Insurance, I have heard healthy Tradesmen tell me that they don’t need to have Income Protection Insurance because they are fit and healthy and don’t get sick.  They ‘sometimes catch a cold’ but nothing ever happens that would lead to the need to take extended time off work.

It is a common misconception that Income Protection insurance is only for people who regularly succumb to illness or are prone to injury and take a lot of time off work.

Having this insurance in place, can in many instances, mean the difference between a person being able to recover from their illness or injury with the peace of mind in knowing the bills will still be paid from the Income Protection Benefits, or quite literally watching their business go broke due to their inability to generate income and sometimes even to put food on the table – particularly for a self-employed tradesman.

I have recently had experience with 2 such Tradesmen that took out Income Protection insurance solely because it was a requirement for them to work on building sites.   With both gentlemen, they were sole trader/Subcontractor Tradesmen and therefore, were not covered by Workcover or the relevant Workers insurance in their state.

Both were in very good health and during the process of implementing the policies, made no secret of the fact that if it was up to them, they would not take the policy out as they ‘don’t get sick’.

The first gentleman is a 32 year old carpenter named Scott who recently went from being an employee to a contractor and was therefore required to have Income Protection insurance to work on site.  He told me that he never gets sick so can’t understand what the fuss is all about with Income Protection.

This gentleman’s policy went into force in early June 2018.  You can imagine my surprise when he called me rather sheepishly, 3 weeks later to say that he had injured his forearm at work while building a deck.  Nothing out of the ordinary for a Carpenter but as simple as putting his 95kg weight on his right arm while balancing on the deck and he tore the tendon.  This was very painful and resulted in his inability to hold a hammer – a fairly integral part of being a carpenter.

Scott was very concerned as he was only in the initial stages of being a contractor and had done his financial calculations for his new business, based on continued work and without considering the potential effects of 8 weeks of no work that the Doctors he consulted over the injury, told him he needed to take.

Houses

Aside from the physical pain of the injury, this caused some distress in the home life because Scott and his wife had plans to buy a home in the short term and were saving money towards a deposit.  Scott’s wife was obviously concerned about the injury but was also very concerned because the deposit saving plans seemed destined to be put on the shelf while she had to cover all expenses with her newly self-employed husband having an indefinite hiatus from work (and income) while his arm repaired.

Scott was initially reluctant to make a claim on his Income Protection insurance because it had been going for less than a month and he felt a claim was too soon.  I reminded him that this is precisely why people have Income Protection insurance and urged him to proceed with the claim.

Scott agreed and I collected the necessary paperwork and contacted the insurer, MLC, to notify them of an impending claim.   Their response and subsequent service both to me as the Adviser and to Scott as the client, was exceptional and demonstrated that they understood the difficult position that this unplanned injury had caused to Scott and his family.  To sweeten this deal further; Scott’s policy had only been going for 3 weeks and he had paid the first monthly premium.  Because he went on claim during that month and premiums are not payable while on claim; Scott had the first month’s premium refunded to him as well as the normal benefit amount.

The result?  Scott received benefit payments from MLC which kept everything going while he recovered and now he is back at work and his plans, and those of his wife, were not interrupted by an unplanned injury.  Oh, and Scott is now a believer in the importance of Income Protection Insurance.

The second example is very similar to the first; A fit and healthy Tradesman who had recently made the move from employee to contractor and couldn’t see the need for Income Protection.  David is his name.  David reluctantly took out his policy as a requirement to work on a construction site and genuinely believed that he would never have to make a claim.

Two months after implementing the policy, David fell backwards, climbing down from a ladder and landed on his elbow.  The resulting jarring to his upper body, broke his collar bone and again, caused great pain and serious concern as it was immediately obvious to David that he needed significant time away from the tools and he had no leave entitlements.

Building Project

David’s injury is more of a long- term problem than the first example and required multiple visits to an orthopedic surgeon and surgery involving plates and screws being inserted and then ongoing time off work to allow recovery.

The insurer was again MLC and the result was the same.   Very professional and empathetic treatment by a claims manager at MLC and the financial result is that David is recovering physically with the bills being paid by Income Protection benefits while he does.

Both these gentlemen have thanked me profusely for persevering with them and they now realise that incidents like this DO happen to fit and healthy people.  You can’t plan for the injury but you can make arrangements so that an accidental fall won’t have the same effect on those nearest to you or your financial well-being.

Income Protection insurance is designed to replace the salary/income of a person who is injured or becomes ill and is unable to continue to perform their work duties.  It is designed to replace 75% of income on a short, medium or long term basis for a defined period of up to 2 years, 5 years or up to Age 65 after a certain waiting period; most commonly 30 days.

If you would like to see how Income Protection could work for you, please click on this link and follow the prompts, or you can email me or phone 1800 808 800.


Paul Simpson is a qualified financial adviser. He assists Trade Risk clients with a range of personal risk insurances including income protection, life insurance, TPD and trauma insurance.

Paul is an Authorised Representative (412306) of Synchron, AFSL 243313.

Income Protection for Tradesmen