Income Protection Insurance: Protecting Your Most Important Asset
What is Income Protection?
When we think about insurance, our minds immediately turn to our homes or our cars. But have you considered the need to insure your biggest asset – your ability to earn income. Although we don’t like to think about it, life can change in an instant. So, if your family relies on your income to meet financial obligations and living expenses, reviewing your personal income protection requirements should be at the top of your list.
Am I Eligible For Income Protection Insurance?
Whether you are a salaried employee or self-employed, you can apply for income protection cover. Although employees are covered to a certain extent by Work Cover in Australia, there is no substitute for adequate cover that insures you for incidents in and outside of the workplace. Without access to Work Cover, this insurance product is vitally important for the self-employed.
There are So Many Policies – How Do I Decide?
There are different income protection policies on the market with their own waiting periods, premiums and income coverage. It’s important to check any eligibility criteria and exclusions as some policies restrict cover for certain events and for particular occupations. The overall aim is to ensure you can continue meeting your commitments and maintaining your lifestyle during a period of not working.
Premiums are usually paid monthly and can be stepped or level. Stepped premiums rise with time whereas level premiums will stay at the same rate while you continue to hold the policy.
The waiting period before benefits are paid can have an effect on the quoted premium. You should speak with your financial planner to find the option that is right for you. Waiting periods are usually between 30 and 90 days. However, there are also options for longer waiting times. It’s important to consider your full financial picture when deciding on your waiting period as you may have existing insurance or resources that can be utilised before your income protection insurance kicks in.
You can choose a benefit period from 2 years up to 65 years of age. Most policies provide protection for up to 75% of your income. Consider a policy’s maximum monthly benefit in your decision making as some insurer’s benefit amounts may be insufficient for your requirements.
Taxation Concessions For Purchasing Income Protection
Structured correctly and with a holistic view of your finances in mind, purchasing income protection may provide you with a number of taxation benefits depending on the option you choose.
Income Protection Insurance outside Super
Premiums paid for income protection outside of your super fund are generally tax deductible. You also may have a greater range of policies to choose from.
Income Protection Insurance in Super
This is a helpful option if your cash flow outside of Super isn’t enough to cover the insurance premiums. However, your superannuation balance will decrease with the payment of premiums. Some Australian super funds now also offer income protection as a standard default insurance along with life insurance. These default policies should be reviewed to ensure they meet your needs.
Take a Holistic View of your Personal Insurances
Income protection is often considered as part of a complete review of your personal insurance needs. This includes life insurance, total and permanent disability insurance, and trauma cover. Invest in peace of mind. There are a number of ways you can obtain income protection insurance. By speaking with a Financial Planner first, it means that the choice of policy can be aligned to your current and future financial needs.
We know insurance can get confusing. So, here’s a snapshot of information about income protection to give you a simple overview. View our Insurance Protection fact sheet.
Income protection insurance provides peace of mind for you and your family and allows you to focus on recovery if you become sick or injured. Speak to one of our Planners on 1300 888 803 who can help find the right policy for you. Or book an appointment online.