The importance of having an Income Protector policy in place cannot be overemphasised. Without one, professionals leave themselves open to massive risk in the event of an illness/accident/trauma that leaves them unable to work for a period of time.
We chatted to Derek Dingwall, Momentum Financial Planner, to learn more about recent changes to Income Protector policies – and what this may mean for you.
On March 1 2015, the Taxation Laws Amendment Act of 2013 became effective. What are the implications of this development for Income Protector benefits?
Going forward, the premiums on Income Protector benefits are no longer tax deductible. In the event of a claim, the benefits are not taxed. However, maximum benefits are now based on the client’s after tax income.
What are the implications of this for the consumer?
Momentum will still pay out the full insured benefit on existing Policies, but if these Policies are altered or if the client proposes for a new Policy, the new legislation will be applicable. It is important that a client contacts his/her Financial Planner before making any alterations to this benefit.
If Income Protection benefits are no longer taxable, does one still get 100% of the benefit payment in the event of a claim?
One can still get 100% of after tax income on Temporary Income Protector benefits.
Has the Income Protector benefit criteria around age been altered?
Income Protector benefits are available till age 70. Over and above this, a Longevity Protector benefit is available which pays benefits beyond the age of 70.
As a Momentum Financial Planner, Derek can only comment on these changes from a Momentum perspective. He is not familiar with changes made by other companies.