You insure your house, you look after your super, but do you safeguard your biggest asset of all – your income? That’s where income protection cover comes in. Here’s how to make sure your policy gives you the security you’re looking for.
Income Protection gives you a regular income if you can’t work due to accident or illness, this replaces part of your regular income giving you financial support for as long as it takes to get back on your feet.
Affordability:
Income protection can be cost-effective!! This is because your premiums are generally tax deductible if you hold your policy outside of your super – making it more affordable to get the cover you need.
Do you need Income Protection insurance?
You may want to consider Income Protection insurance if you:
•have a partner, family or dependents
•have a mortgage or any other personal debt
•have a business or self-employed
•would need money to live if you were unable to work
•don’t have adequate savings to cover unexpected expenses.
How much you’re covered for
Most income protection policies let you choose your sum insured – usually up to 70% of your salary before tax (excluding super contributions). But remember, the higher the sum insured, the more you’ll pay in premiums, so it’s important to think about how much you’ll really need.
To work out the right level of cover for you, start by considering all your everyday expenses. This might include things like rent or mortgage repayments, bills, groceries and school fees. You can also consider your occasional costs like your car registration and insurance. You should discuss this with your financial adviser.
Income Protection changes now in effect
As of 1 October 2021, income protection policies with generous features and benefits were taken off the market. APRA required insurers to change disability definitions, re-look income assessments and cap monthly benefits at 70%.
On 31 March 2020, new applications for Agreed Value income protection insurance were discontinued.
All income protection insurance policies available today provide an indemnity type of cover. This means if you make a successful claim the monthly benefit you’ll receive is based on your income at the time of claim.
How long you’ll receive a benefit for
Your benefit period is the maximum amount of time you can receive payments from any claim. It varies depending on the income protection policy you have. When you take out cover, you can either choose a time period or the longest available benefit period, which is to the policy anniversary when you’re 65.
Benefits of Taking Insurance Through a Financial Adviser
A financial adviser can help you understand your current financial situation, as well as your goals for the future, so you get the right cover for your needs. They can structure your cover in a way that gives you the best value for money and suits your cash flow and tax objectives.
