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Income protection insurance

Post Date:27/10/2008 | Author: Office
For people that don't have income protection.

Here are some reasons to get it. Income protection insurance can help cover your ability to earn an income if you cant afford to stop working.

 

 

  • Most people can't afford to live for longer than 2 months if their income stopped.
  • Income protection is a full tax deduction and only costs about 1%-3% of your income.
  • If you can't pay the rent or home loan after two months, can you survive on $11,250pa (Full Sickenss Benefit) after spending your current savings and investments?
How much do I need?

The amount of income protection insurance you need will be determined by the salary you want to insure. Generally income protection provides cover for about 75% of your salary in the event of illness or injury preventing you from working.

You need to consider what the costs are of meeting a mortgage and other debts; providing for a spouse, children or other dependents; and maintaining your assets and investments. Remember the point of income protection insurance is to provide an income stream if you can no longer work.

What should I pay?

Shop around and compare insurers’ (including your super fund) cover and prices; they can differ greatly. Premiums are set depending on:

  • Age (premiums may increase or cover decrease as you get older);
  • Gender;
  • Health and pre-existing conditions;
  • Whether or not you smoke;
  • Occupation (for example, a manual labourer pays different premiums to an office worker); and
  • The time you choose to wait before receiving payment.

Prices vary depending on age and other factors, but income protection can cost around one week’s salary per year (premiums are generally tax deductible).

There are great value offers at the moment to new customers that want to protect their future income.

Tips and traps

This isn’t an exhaustive list, so compare product disclosure statements and consider getting professional financial advice.

  • When taking out a policy, ask these key questions: what’s covered; what’s not covered; how much will I be paid after a claim; and what will the insurance premiums cost now and later?
  • Consider getting a policy with index-linked premiums and cover so you know the cover will keep up with inflation.
  • Consider a non-cancellable policy; otherwise companies may reassess your health or other factors on each renewal, possibly raising your premiums or refusing to continue cover.
  • Offset clauses allow most insurers to reduce payouts if you have other income (for example, sick pay from your employer or Centrelink benefits). Check the relevant section of the policy for details.
  • With group insurance provided through super: the agreement is between the fund trustee and insurer. Make sure both know who your nominated beneficiaries are.
  • Check the waiting period (how long before you receive payment, often 30 or 90 days) and the benefit period (for how long payments will be made — typically two years or sometimes until your normally expected retirement age).
  • Some policies pay out if you’re unable to perform your normal occupation; others only pay if you can’t perform any occupation for which you’re suited by education, training or experience.

Take the first step now, call 1300 882-456 to get some quotes

or

Make an appointment to talk with someone CLICK HERE

 

 

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