If you’re considering income insurance, the first question you may ask is, ‘What’s in it for me?’ The answer is simple: continued income in the event of illness or injury.
In the event that you get sick or injured and cannot work, income protection replaces up to 75% of your monthly income for a set period of time. An additional 10% may be contributed towards your superannuation, bringing the grand total up to 85%. You may receive this benefit for a few months, or it could replace your income until a nominated age (e.g. 65); it depends on your policy, and the insurer.
There are a number of benefits to having a product like this, one of which is ‘peace of mind’. We’ll give you eight compelling reasons why income protection is a smart idea – ranging from tax benefits to less stress during a difficult time.
Speaking to one of those points, many customers then ask, ‘Are income protection premiums tax deductible?’ They are…depending on how you take out cover. You’ll want to read up on income protection and tax before making a decision.
How are other Australians getting insured?
Many of us like to see what other Aussies are buying before we go ahead and take the plunge. This is true of TV’s, restaurants, even smartphone apps…and it’s true for insurance as well.
According to Experien, 27% of Aussies stated they purchased income protection. However, the global average is closer to 33%.
We mentioned before that income protection can cover up to 75% of your monthly wage. You’ll be interested to know, however, that the average level of cover most Aussies have covers just 17% of their needs, according to Rice Warner. That being said, those with solid savings or a second household income may think this amount of insurance is perfectly adequate. For others, it could leave you short during a difficult time.
Finally, consider this; the average age you’ll need to claim on your income protection, according to Asteron Life, is 46. But, the average age that most Aussies let their policies lapse is 45.
It would seem that many of us don’t yet have income protection. Those that do may not have enough cover, and often we discontinue cover right before it’s needed.
Consider your own circumstances
While it’s helpful to know what other Australians have done before you, it’s smarter in this case to instead focus on your personal circumstances. Only you know how much money it costs to run your household; what your expenses are, your debts, and whether or not you’re able to pay these things off.
Could you do so on savings alone? Could another household member’s income make up the difference? Consider how you’d pay for these things if you were off work due to sickness or injury. Could you afford hospital and rehabilitation bills?
Think about these questions, and if you believe you’re not able to pay these debts off without assistance, income protection may be worth considering.
Find a policy to suits your circumstances by comparing income protection on our website.
The information provided here is general only and does not consider your personal objectives, financial situation or needs. Before you decide to purchase a product, it is important to read the relevant PDS.