Many Australians believe that their home is their biggest asset, but the truth of the matter is that their income and ability to earn are far greater assets. And yet, most Australians fail to take out income protection insurance, which provides them with an income if they fall ill or are injured.
Instead, the majority of Australians have a ‘she’ll be right’ or a ‘that won’t happen to me’ attitude. For some of us, this means no income when the unexpected happens and that can lead to financial anguish and un-needed stress.
It is estimated that some 95 percent of Australians don’t have enough income protection insurance, or any cover at all. In fact, a recent Lifewise online survey reports that out of some 1200 respondents, only 23 percent had income protection insurance. But, in the event of illness or accident this means not being able to make ends meet with the bills piling-up and debts such as home loan repayments becoming very difficult to manage.
Tracy Sawtell, 31 Wouldn’t Be Without Income Protection
Beautician, Tracy Sawtell, who runs her own business, says that she took out income protection so that if something unexpected happened she could still pay her bills.
Tracy who has a mortgage, says that while she has a certain lifestyle that she’d like to maintain, she cannot go without paying her mortgage and eating. She believes that anyone who goes without income protection insurance is crazy, as it covers you when you need it the most. Plus, it’s tax deductible and affordable.
When Should I Take Out Income Protection Insurance?
Insurance agents suggest that income protection should be taken out when you have the following:
Debt of any kind.
Children to care for.
What Do I Need to Know About Income Protection?
Income protection policies can differ greatly. So, take your time to read through a policy and ask questions before you sign any document. The most common differences you’ll encounter are associated with cover durations and waiting times for payments.
Cover periods typically differ from 2-years or until your 70th birthday.
Waiting times are typically between 30 to 90-days.
How Can I Protect My Income?
1. Check to see if your superannuation includes income protection cover. If it doesn’t then consider what level of cover you need to protect yourself.
2. When you take out a policy be honest with yourself and the agent.
3. Consider how long you are prepared to wait for your cover to become active in the event of illness or accident.
4. Calculate how much sick, annual, and long-service leave you have and what this is worth to you financially.
5. Remember that income protection insurance premiums are typically tax deductible.
Are All Income Protection Cover Premiums the Same?
Income protection cover costs differ greatly. Canstar recently conducted an analysis of people who worked in the same industry, in the same building, and discovered that premiums can be very different due to the risks associated with their work.
Evidentially there were more than 40,000 income protection claims made in 2013. This amounted to $1.26 billion in claims. However, 7-years ago, in 2006, only $570 million in claims were made.
What are the Top Causes of Income Protection Claims?
The majority of income protection claims being made are associated with the following illnesses:
Mental health conditions.
How Can I Take Out Income Protection Insurance?
Income protection can be bought as an insurance policy that is linked to your superannuation policy. This typically means that your premiums are deducted from your employer super contributions. Alternatively, you can take out a separate income protection cover, which is then tax deductible,
Do you want to know more about income protection insurance? eChoice has partnered with Rate Detective to help you compare up to 12 income protection insurance quotes . Speak to us today for your Free Insurance Quote!
Written by eChoice