Income Protection

Throughout life one of your biggest assets is your ability to earn an income. Income protection insurance preserves this asset should you experience an accident that renders you incapable of earning a wage long term. In other words, if you become temporarily or permanently disabled, whether physically or mentally, and thus unable to work, an income protection policy will see that you continue to get paid up to 75 per cent of your prior salary.

Although considered a relative of life insurance, income protection differs in the sense that the policy holder does not have to die before any benefits are received. Arrange your policy based on your individual circumstances. For example, if you are single with no dependents you may only want to insure 50 per cent of your wage. However, if you are married with children insuring the maximum amount is the most secure option.

Those aren’t the only things to consider - income protection policies also vary depending on factors such as:
• Occupation: A construction worker will typically pay a higher premium than an office worker. The more physical risk involved, the higher the cost. There are normally three policy categories – white collar, blue collar and sole trader/business owner.
• Lifestyle choices: Smokers will usually pay more than non-smokers.
• Health: Any pre-existing medical conditions could affect the cost of your insurance.
• Age: Unless you secure a fixed premium, the cost of your income protection insurance will continue to rise as you get older.
• Other factors: Marital status, sex, what percentage of your wage you wish to cover, what you want to be covered for (e.g. permanent disability, temporary disability or both) and nominated waiting period (the longer the waiting period, the cheaper the premium).

Income protection will cover up to 75 per cent of your income, which can be a lifesaver when it comes to things such as bills, groceries, credit card bills and home loans. There are, however, some extras you may want to ask your insurance provider about. It is possible to be covered for rehabilitation costs, which can include the hiring of a nurse or a partner’s wage if they have to take time off to care for you. Business owners may want to cover themselves for office rent and associated costs required to keep the workplace running such as phone and electricity bills.

Another plus with income protection is that the premiums you pay are tax deductible. The amount you can claim back will vary depending on individual circumstances and your policy so it may be a good idea to get your accountant’s advice before signing anything.

Remember to read over your policy’s terms and conditions carefully before agreeing to it. It may be boring, but it will save you a lot of time and money in the long run.

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Business Financial Services

Income Protection