Income Protection Insurance

Income Protection

What is income protection?

Income Protection insurance provides the insured with a monthly income in the event he or she is unable to work due to either sickness or accident. Generally, only those employed for a certain number of hours per week are eligible for this type of cover.

Are you employed or self-employed?

How long would your income continue if you suddenly were unable to work?
Could you continue to meet your regular living expenses if your income stopped?
How long could you live off your savings alone?
Would you qualify for Centrelink assistance and, if so, would this be enough?

If you’re like most people, your way of life is at least partially dependent on your ability to work. Therefore, an extended absence because of sickness or injury could be devastating to your lifestyle, and that of your family.

Effectively, Income Protection is designed to replace a portion of your income if you are unable to earn it yourself due to either sickness or accident.

What this means for you

The benefit paid by income protection can help you keep up with all of the expenses your income usually takes care of. That includes things like mortgage repayments, groceries and your regular bills.

This money also means you don’t have to rely on family and friends, government assistance, or leave entitlements from your employer — none of which are guaranteed to provide a sufficient level of financial support.

It’s important to note that benefit payments for income protection usually don’t start immediately, as a waiting period can apply during which no benefit is payable (this could range from 14 days up to two years). Also, the length of time that you are paid for is dependent on the benefit period chosen.

The maximum amount of cover is usually 75% of gross earnings. However, optional additional benefits may be available. Most good policies also provide ‘partial’ benefits in situations where someone can return to work, but not in the capacity they were before the sickness or accident.

Exclusions may apply for certain events.

Income Protection policies can be written within or outside of superannuation. However, legislation imposes limits and/or conditions on policies within superannuation.

Income Protection policies are quite often complimented by TPD and/or Trauma policies to provide ultimate protection, especially in the event of a long term or serious disability.

Insurance policies will often vary in their features and benefits – especially so with Income Protection - so you should work with your financial adviser to choose a policy that suits your needs and your budget.