Income protection insurance can help provide a cash flow when you’re unable to work because of illness or injury. It can feel like having a safety net designed to protect the lifestyle you and your family work hard to create.
However, not everyone has income protection insurance. If you’re one of those people here are five good reasons to consider it:
- Financial commitments– If your children’s education depends on your income, or you have a mortgage, loans or investments which require regular repayments, you might want to consider income protection insurance. The financial cost of defaulting on any of these payments may be higher than the cost of the income protection itself.
- Daily cost of living– Does your income support your family’s basic living costs like food, housing and transport to school and work? You don’t need to be the main bread winner for your loss of income to have an impact on your family.
- Amount of savings– Do you have enough savings to support your lifestyle if you were unable to work for a prolonged period of time?
- Working for yourself– If you’re a sole trader, will you be able to cover the expenses of your business if you were unable to work because of a sickness or injury?
- Tax savings– Income protection premiums are generally tax deductible.
Working out what’s right for you
Insurance can give you peace of mind at every stage of life. The key is to keep the right level of cover in place at the right time and to understand any risks you may be facing at different stages. Come and speak with us so you have peace of mind that your cover will be in place when you may need it most.
Risks of automated policies held within super
- You might not be getting the amount of cover you need.You might only be able to get cover for up to two years on some super policies (as opposed to the age of 65 on some standalone policies)
- The trustee has to meet the requirements of the temporary incapacity condition of release before the income protection benefit can be paid to the member whereas, outside super, the insured person only has to comply with the terms of the insurance contract. Note: there are ways we can structure your policy through super linking to avoid this issue.
Making insurance affordable over time
Insurance through super
There are two key ways to hold insurance. You can hold your insurance through your super fund or outside of super, although some policies cannot be held in super such as trauma protection.
Buying insurance through super means you don’t have to pay for your policy from your household budget, although it does come out of your super money and there can be tax implications. We can help you work out whether holding insurance through super is the best option for you.
Actively managing your level of cover
There’s a difference between keeping a policy in place and the level of cover provided by the policy. And remember, you don’t have to keep the same level of cover in place forever.
The key is making sure your cover always meets your current needs. But it’s essential not to be underinsured at the same time.
You could save on the cost of your policy as your needs change. For example, say you have children and they leave home or your debt levels reduce-your exposure to financial risk may be less than it was and therefore these are key opportunities for scaling down your level of cover.