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Income Protection: Know What You Are Paying For

7th November 2023 Print

Most Australians are likely to have insurance that protects things such as their cars, homes, or health, but there is one crucial asset that can sometimes slip under the radar: income. Everyone is susceptible to uncertainty in their lives, which is why we can never be too safe. However, the one thing that keeps life ticking over smoothly for most people is their income. This is why income protection insurance may be one of the most important purchases you can ever make. 

What exactly does it cover?

Income protection insurance is designed to cover up to 75% of your salary if an unfortunate accident or illness impacts your ability to work. This means that we can focus on our recovery without the stress of financial instability.

Who does income protection insurance benefit the most?

Income protection insurance is something that every Australian should make sure they have, but there are certain groups that do benefit most.

Self-employed – Being self-employed certainly has some major benefits concerning freedom, but it can have implications. Self-employed people aren’t always eligible for certain financial support, so income protection insurance is absolutely essential.

Single-income families – If you and your family rely primarily on one income, it must be protected. With income protection insurance, you can rest assured that you will have financial stability throughout any difficult times you face. 

People with debts or a mortgage – If your outgoings include regular loan payments of any kind, income protection insurance ensures that these can be taken care of if your cash flow is disrupted. 

People without significant savings – If you don’t have a significant amount of money put aside to fall back on, protecting your income is one of the most intelligent decisions you can make. 

What you should make sure your income protection insurance policy includes 

When reviewing or taking out an income protection insurance policy, it is vital to make sure you are paying for something that will genuinely help if you need to make a claim. Below is a list of the basics you should make sure are in your policy. 

The right percentage of income is covered – You want to ensure that the percentage of your salary you will receive if you need to make a claim is enough to cover all outgoings you have and sustain your day-to-day life. 

The waiting period suits you – When taking out a policy, you should be able to opt for a waiting period that suits you. This means you will receive your benefit when you need it most with minimal impact on your premiums. 

The benefit period can cover you for as long as you need – This is a big one. Ensure your policy is for the most extended period to ensure you are covered if anything extremely serious affects your workflow. 

Benefits are specific to your occupation – If your occupation involves additional risks compared to others, it is imperative to get that included in your income protection insurance policy. 

In conclusion 

Income protection insurance can have some massive benefits and improve your living situation throughout unfortunate times. However, before taking out a policy, you should ensure that your cover suits your needs and you know exactly what you are investing in.