Income Protection Insurance

Why insure my income?

Insuring your car, home and contents, and other valuable assets is a no-brainer. But have you thought about insuring the key activity that helped you accumulate all those assets? That is your ability to generate income.

Your income: your family and lifestyle depends on it.

Your continued income is - hands down - your most valuable asset - it is the foundation for funding everything else in your life.

You’ve worked hard to earn the lifestyle you lead, if something happened to you, say an accident or sudden illness, your ability to earn income would stop – either temporarily or permanently. Imagine how different your life would be if that happened? How would you and your family survive?

Income Protection Insurance Protects you and your Family.

Income protection insurance provides you with regular payments if you are unable to work due to sickness or accident. Cover is provided 24 hours a day, 7 days a week, worldwide.

It means that regular payments still get paid – essential payments such as your mortgage, school fees, petrol, credit cards, and everyday living expenses such as food, clothing, phone, gas and electrical and child care.

PLUS you will also have funds to pay for excess medical expenses that your health fund might not cover – providing you peace of mind while you focus on recovering your health. The last thing you want when you have an accident or get sick is to worry about money.

Get your obligation-free quote today:

How much does Income Protection cost?

Keep in mind that your income protection premiums are usually FULLY TAX DEDUCTIBLE. This means protecting your income may actually reduce the amount of tax you pay on your income, so it makes logical sense to have it.

Your monthly income protection premium is determined by a few different factors, these include:

• The amount of cover you’re entitled to: is up to 75% of the pre-tax income earned in one year (from your personal exertion) after deduction of any expenses incurred in earning that income.
• The ‘waiting period’ you choose: The waiting period is the amount of time you have to wait after you inform your provider that you are sick or have had an accident. Options range from 14, 30, 60, 90, 180, 365 and 730 days. It is important to note that payments from companies are usually paid in arrears. Most companies make their first payment to you 30 days after the waiting period has expired.
• The ‘benefit period’ you choose: periods offered range from 2 years, 5 years to age 65 and to age 70.
• Your occupation is also a factor that is also taken into consideration
• Health and lifestyle factors.

There are two types of contract you can choose from: either ‘agreed value’ or ‘indemnity’.

• For an agreed value contract, the monthly benefit is the amount applied for (and proven usually with a tax return or assessment notice for the last two years) and is accepted by the insurance company. The insurer will guarantee to pay the insured the monthly benefit irrespective of whether your income has dropped since the policy inception, once the waiting period has been served.
• An ‘indemnity contract’ can be 15% - 20% cheaper than an agreed value contract. Under the indemnity contract the monthly benefit will be the lower of: the monthly benefit applied for and the insurer accepts as varied or 75% of your pre-disability income, which is calculated, based on your average monthly income during the 12 months before the start of the waiting period.

In many cases insurance companies also offer certain occupation options such as ‘booster’ benefit or ‘accident benefit options’. For more information about Income Protection Insurance see our Income Protection FAQ <link: FAQ: IP section>.

As you can see there are many options available to tailor the income protection you need to your individual circumstances. We always recommend that you use an adviser to make sure you have the right cover and are only paying for the benefits needed.

Remember, premiums for income protection are usually tax deductible whether you are employed or self-employed. Also, note that income protection is of course subject to underwriting assessment.

Which company offers the best Income Protection Insurance?

Your insurance advisor will advise you as to the best insurance cover for your income and circumstances.

Need an Income Protection Quote?

Call us on (03) 9890 3388 to book an obligation-free appointment, or get a free online quote now.

The information contained in this outline is of a general nature only. It has been prepared without taking into account any individual's objectives, financial situation or needs. Before acting on this information, you should consider the appropriateness having regard to your own objectives, financial situation and needs.