Income protection is also known as disability income insurance and is designed to provide a replacement income if the insured person is unable to work due to a disability. This disability can be caused by either sickness or as a result of an accident.
If something happened to you and you were unable to work, would you have enough money set aside to cover your day-to-day bills and look after your family? Even if you think you’d be ‘okay’, how long would things be okay for? While many think ‘It won’t happen to me’, the statistics don’t lie. It is estimated that one in three Australians will be unable to work due to illness or injury for a three-month period, or longer, during their working life. Confronted with this situation, many Australian families experience significant financial difficulty, sometimes with no income to cover their living expenses.
Income protection insurance allows you to continue to receive a monthly income of up to 75 per cent of the income you were earning prior to becoming too sick or injured to work. Income protection policies are very flexible depending on your individual circumstances, and importantly, they give you the financial security you need to be able concentrate on recovering without having to worry about your bills.
The mistake a lot of people make is thinking that they do not require this cover as they can access worker’s compensation or sickness benefits, however accidents can happen outside of the workplace where worker’s compensation won’t apply and sickness benefits may not cover you for an extended illness. We strongly recommend the maximum level to ensure you are best protected in the event you cannot work.
All premiums for income protection are fully tax deductible. If you were to make a claim against the policy, all benefits received must be declared as income as they are considered taxable.
Income protection can be held either within your superannuation or outside of your superannuation account.