What is Income Protection Insurance?
Income Protection Insurance, also known as disability income insurance or salary replacement insurance, is designed to provide you with a portion of your income if you are unable to work due to illness, injury, or disability.
Income Protection pays a monthly income benefit which is generally restricted to 75% of your gross income, with more recent policies restricted to 70% of your income. This helps you to meet your ongoing financial obligations such as mortgage or rent payments, utility bills, and other living expenses.
Also, unlike TPD (Total and Permanent Disablement Insurance), it covers temporary illness and injury.
Why should I have Income Protection Insurance?
Income protection can be particularly valuable if you are the primary breadwinner in your household or if you do not have significant savings to fall back on in case of unforeseen circumstances.
Considering most people will work to 65 years of age, if you add up the amount of salary you are to earn over this period then you can see how this becomes your most important wealth building asset to protect.
What type of Income Protection Insurance should I get?
Income Protection Insurance policies can vary in terms of coverage, waiting periods (the time between when you become unable to work and when benefits start), benefit periods (how long benefits are paid out), and the definition of disability (whether it is based on your ability to perform your own occupation or any occupation).
Insurance premiums can also be paid by superannuation funds or it can be paid from your personal funds. Consideration of which structure to hold your cover is important as it will affect the quality of cover that is available to be claimed on.
Depending on how the policy is structured premiums paid can be tax deductible to the policy owner.
It’s important to carefully review the terms and conditions of any Income Protection policy to ensure it meets your specific needs and circumstances.
Importance of seeking Financial Planning advice for Income Protection Insurance
There are a number of choices to consider when it comes to Income Protection as well as how it links with other types of personal insurance covers (Life, TPD and Trauma).
To obtain TPD cover that holds appropriate policy definitions and is cost effective in comparison to the market then speak to Sterling Grange Financial Planning to receive expert professional insurance advice.
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