You insure your car and your home but what about your income? The ability to earn an income is your greatest asset. If you can’t rely on savings or sick leave to see you through an illness, income protection can help.
No-one likes to think that something bad might happen to them but accidents or illness can happen. Each year over 50,000 Australians suffer a heart attack, while half of Australian men and one in three Australian women will suffer cancer at some stage in their lifetime*.
Your income is one of the most important assets you have, so doesn’t it make sense to protect it? Here we have prepared a simple list of the key things you need to know about income protection insurance.
1. Replaces part of your income
Income protection insurance typically pays upto 75% of taxable monthly earnings. This can help to cover your day to day expenses, such as your mortgage and other bills, until you are able to return to work.
2. Pays out for a set period
After an initial waiting period (often 30 or 90 days), income protection policies generally cover your income for a set period – for example 2, 5 years or to age 70, until you are back on your feet.
3. Covers most illnesses that leave you unable to work
Most income protection policies cover a wide range of illnesses such as heart attack, cancer and stroke and allow you to claim multiple times if you need to.
4. Funded by your super account
You can choose to hold an income protection policy either through your super fund or independently. When you hold cover through your super fund, the premiums are deducted from your super balance, freeing up more of your income. You also pay tax of only 15% on super contributions.
5. Not all policies are equal
Whether your income protection cover is inside or outside super, ensure you have the right cover for you. Look for policies that allow you to choose the waiting period, length of time you would like to be covered and the percentage of your income you want to be paid.
Income protection is something many of us neglect. Yet having the right cover in place can give you peace of mind that you will be able to meet your living expenses and focus on recovery in the event of a serious accident or illness.
Sources: Heart Foundation, Cancer Council