Here are some fast, potentially surprising facts for you:
More than a quarter of Australians have income protection that could potentially help keep on top of expenses, although the global average is closer to 33%. So, why is this product so valuable? What expenses will it cover? And – the most important question – can anyone get it?
In the event you become ill or you’re injured, you may have to take time off work. Could you afford the new medical bills? What about the rest of your household bills, and your loans? If the answer is, ‘I’d struggle’, income protection may be the product for you.
This form of insurance generally replaces up to 70% of your monthly income for a set period of time, although you can insure yourself for less. For some insurers, when you’re on a claim, they’ll only pay a benefit to you for two years, and others will pay a benefit until a certain age. In any case, your claim will cease if you’re able to go back to work again, or if you’ve exceeded the benefit period.
You will need to sit through a waiting period between when you stop work, and when you begin receiving your benefit. Additionally, you will be unable to claim for a period of time when first taking out cover – several months, depending on which insurer you choose.
Your income protection costs will vary, depending on a wide variety of factors. For example, if your income is quite large, you’re likely to pay more in premiums.
It also depends on whether you opt for ‘agreed’ or ‘indemnity’ cover.
On top of this, there are a number of risk factors that affect your premiums, such as your occupation, and any pre-existing medical conditions you have.
There are lots of benefits to being covered by income protection. A key one is the satisfaction that your financial situation is more secure. There are other, more tangible advantages for you to consider, although some/all may not be available with every policy.
Additionally, some insurers won’t charge you any premiums while you’re claiming on your income protection. The final advantage is that income protection can be claimed on your annual tax return. However, you can only do this if you’re paying your premiums out of your pay cheque, not your pre-tax income that goes towards your superannuation.
There is plenty to look forward to, but you shouldn’t postpone getting covered. Accidents happen all the time, and you’re better off preparing for them now than not at all.
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.