Most people insure their car, house and belongings, but not the most important thing – themselves. Your ability to earn an income is your greatest asset; it’s what enables you to cover your day-to-day living expenses and to purchase the things or go to the places that make life a little more fun. Income protection insurance provides a regular income in the event of illness or injury that makes return to work impossible, either over a short or long period.
Why should I insure my income?
Do you have enough savings to cover you for one month without a n income? How about three months? Around 1 in 3 people report suffering from a disability or long-term restrictive condition, that may prevent them from working for a period of time1. Some of the main causes of an extended absence from work include: accidents, musculoskeletal disease, mental disorders, cancer, heart disease, and diseases of the nervous system, sense organs and digestive system2. Even if you suffer an accident at work, Workers Compensation will not provide enough assistance to cover your ongoing financial requirements. An injury or illness suffered outside of work is not covered by Workers Compensation at all. And if you have a mortgage, maintaining a regular income can be even more important. A long-term injury or illness can be devastating enough, without losing your home as well; these are the number one causes of mortgage stress3.
How does Income Protection Insurance work?
Income protection insurance can be tailored to meet your needs and budget, by providing a range of options for both the waiting period and the period of cover. Premiums are very affordable and are tax deductable if paid personally, or you can pay your premium via your superannuation. Regardless of the level of cover you choose, your income protection insurance may:
- pay up to 75% of your annual income while you are unable to work due to illness or injury, for a predetermined period of time
- provide payments for either partial or full disability
- help with the cost of a carer and assist with rehabilitation expenses
- assist with covering day-to-day expenses, mortgage repayments, medical bills, etc.
What do I need to do to get an Income Protection policy?
The requirements you need to fulfill in order to arrange an inco me protection policy will differ greatly depending on the type of policy, your age, gender and general health. Some may provide cover based only on a questionnaire while others will require a medical to be completed. Insure & Invest Market can assist you to determine the level of cover you require, provide quotes from a range of leading insurance providers and complete the application forms for the insurer of your choice.
Things to consider
- Check the waiting period (how long you have to wait to begin receiving payments). This is usually 14, 30 or 90 days, or 2 years.
- Consider how long you will require payments. You can generally choose to receive payments for anything from two years, or until age 65.
- Make sure you know what is covered by your policy.
- Be sure you understand your insurer’s definition of ‘unable to work’; some policies will pay out if you’re unable to perform your regular job, others will only pay if you are unable to perform any job within your training/skill set.
- Ensure your policy is guaranteed renewable (cannot be cancelled).
- Australian Bureau Statics National Health Survey
- 2007-2008 Asteron income protection policy figures,
- 2009 David Koch, SMH July 2008