Did you know that, over the 2014-15 fiscal year, Australian workers lodged more than 107,000 serious injury- and disease-related claims, and were responsible for 77% of direct and indirect costs? Without adequate coverage, your financial livelihood and standard of living might suddenly be at risk. An accident or illness could leave you unable to work and without an income to tend to yourself, your expenses, and your loved ones.
Enter income protection insurance- a lifeline designed to offset some of the financial burdens following severe injury and illness.
Before you choose income protection cover that suits you, it’s important to understand how income protection really works.
What is income protection and how does it work?
Also known as salary continuance, income protection insurance can provide a regular monthly benefit of up to 75% of your income for the length of time determined when you took out your policy. This occurs when you are unable to work for an extended period of time due to illness or injury.
Your policy can provide financial protection for you and your loved ones, allowing you to focus on a speedy recovery and eventual return to work; it also alleviates some of the stress associated with a sudden influx of expenses. From day-to-day costs like childcare, utilities, and groceries, to claim-specific costs like rehabilitation and medical care, Income Protection safeguards your quality of life and your savings account.
What does income protection cover?
Income protection policies cover up to 75% of your income, to a maximum monthly benefit as defined in your product PDS. This number is based on your average earnings during the previous 12 months.
For example, let’s say your average earnings before tax work out to $8,000 per month. This would mean you are eligible to insure a maximum of $6,000 each month.
To ensure you have the most complete coverage, you may wish to “beef up” your income protection cover with another insurance policy:
- Life cover(term life insurance) issues a lump sum benefit to you or the beneficiary/ies named on your policy in the event of terminal illness or untimely death.
- Trauma insurance provides a lump sum payment following serious illness or injury.
- Total permanent disability (TPD) is commonly bundled with life insurance and protects you should you become permanently disabled.
Best of all, there are opportunities to unlock savings when you bundle insurance packages. Talk to one of our insurance experts to find out what discounts may be available to you.
When will I start receiving income protection payments?
When taking out income protection you will have to make a few decisions, including how long you will receive the benefit for and how long the waiting period is before your monthly payments start.
Length of payment eligibility depends on the type of benefit period you choose. You can generally claim an illness or injury any number of times over your policy’s lifetime.
How much does income protection cost?
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When it comes to choosing an income protection policy, we understand cost is often a key consideration. The good news is that in general income protection premiums are tax deductible, reducing your overall spnd come tax time.
We’ve heard from countless customers that the peace of mind income protection provides makes the cost more than worthwhile. Why? Because you can maintain your ability to take care of the things and people you love most… and that’s not something you can put a price tag on.
Policy pricing will differ based on the type of income protection cover you choose. Depending on your situation (how stable your income is, for example), you can choose between an agreed-value policy (where you’ll confirm income and benefit amounts at time of application) and an indemnity policy (where you’ll report income at time of claim). You will also need to consider your waiting period, benefit period and if you would like stepped or level premiums.
How does Lifebroker work?
At Lifebroker our goal is to help you quickly and easily compare a broad range of life insurance products. We want to help you find the policy or packages that best fit your lifestyle and your budget.
To deliver on this goal, we purpose-built an online comparison toolto provide you with a comparative snapshot of insurance products from leading life insurance providers in Australia.
Now that you know how income protection really works, it’s time you ask yourself: are you and your family protected in case you are unable to work due to illness or injury? Chat to one of our insurance consultants today on 13 54 33.
This website offers General Advice only and does not consider your personal objectives, financial situation or needs. Before you purchase a product, it is important to read the relevant Product Disclosure Statements to consider if the product is appropriate for you.