What is Income Protection insurance?
Income Protection can help get you through a difficult period, without having to eat into your savings or rely on outside help – so a temporary setback doesn’t put you behind for years. If you become injured or too sick to work for an extended period of time, it could pay you up to 70% of your income and 100% of your compulsory super contributions until you recover or retire whatever comes first. Then you can use this money to cover your medical and rehabilitation costs, as well as any future expenses, which may also include paying for your children’s education or paying off your home loan.
Disability is more common than you think
It’s easy to believe you can avoid a disabling event if you’re just careful. But the reality is, most accidents are unavoidable and can occur anywhere: at work, on a trip, or in the comfort of your own home. And studies have shown that many disabilities are the result of sickness — like cancer, a heart attack, stroke or diabetes — not injury.
But your lifestyle can remain the same
More than one in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age. That’s why Income Protection insurance is a key resource to help you stabilise your living costs if you can work. It can help provide financial security and peace of mind. And no matter what industry you’re in, your lifestyle doesn’t have to skip a beat.
How does Income Protection work?
Insurance premiums are determined by the type of occupation you do, your age, your current health position, and the waiting period you chose to have before making a claim.
- Replaces up to 70% of your earned income.
- Pays 100% of your employer's compulsory super contributions.
- Policy premiums can be paid directly from your super fund annually if you wish or you can pay them personally and collect a personal tax deduction at your marginal rate.
- Some policies let you automatically increase your level of coverage in the future without the need for a new future health assessment – called forward underwriting – while other more comprehensive Income Protection policies have advanced rehabilitation support features too.
Which Income Protection policy is right for your personal situation is where Sapience Financial can help you.
Who should consider it?
If you have people who depend on you financially, school fees, university tuition costs, health issues, rent or mortgage repayments to make, you should consider Income Protection insurance.
Your ability to continue to be able to make an income is most likely your biggest asset. Without it, it would be hard to support yourself and your loved ones financially, as well as keep your future plans on track. Income Protection insurance can help you stay on track by protecting your ability to continue to earn your income.
How much does Income Protection insurance cost?
- Premiums often range from 3 – 5% of your level of income, depending upon your occupation risks and a number of factors.
Pro Tip: Insurance premiums paid annually usually receive a 1-month discount, and premiums paid from a super fund can receive an additional 15% discount — so be sure to ask your Sapience Financial advisor about what's best for your situation and your budget.
You'll earn a small fortune over your lifetime.
Protect your most valuable asset - your ability to earn an income
Your ability to earn an income over a 30 or 40-year career, is your most valuable asset. Here’s an idea of what you could earn over the rest of your working life, based on your age and current salary. When you consider the value of your earning potential, you can see why its worth insuring.
Income Protection Key Takeaways
- The one thing we all have in common is the need for time to grow and stabilise our financial situation.
- Your greatest financial asset is your ability to earn an income.
- If you're sick or injured and cannot work and you lose your ability to earn an income, that could lead to a set of circumstances that cause a domino effect that damages every other part of your life and those who rely upon you.
Why insure when you can save for a rainy day?
We love the idea of savings but we all have the same amount of time available. By the time we've saved enough for a rainy day, that day may have already come and overwhelmed you and your family. Alternatives, like having to sell down assets, sell your house or car, or move to a cheaper rental to help pay debts, medical bills, or related costs, seem to defeat the purpose of working in the first place. You may recover your health but not have a life to go back to – worst still you may recover your health only to face financial devastation.
It's simple really
Insurance is designed to protect you from the unexpected event and save you from needing to shoulder the responsibilities for the bigger things in life, the cost of serious medical costs, and transfer that weight to a life insurance company
'The real issue is not that you can't afford it, it's that you don't think it will happen to you'. Drew Browne
Personal insurance is a simple and necessary decision to transfer the responsibility of the bigger things in life, to an insurance company, rather than having to be responsible for them yourself or burden your family with crippling debts and a bleak future.
Frequently Asked Questions about Income Protection insurance
Does IP cover Mental Health claims?
Yes. Mental health conditions are the third most common direct cause of Total & Permanent Disablement (TPD) insurance claims, and the second most common cause of Income Protection (IP) claims in Australia.
If I'm a small business owner, is Income Protection still relevant for me?
Yes. As Income Protection insurance is capped at 70% of your income, business owners with erratic income or seasonal cash flow should also consider Business Fixed Expenses Protection insurance to cover the fixed cost of keeping the doors open for business.
How we can help
Income Protection insurance is an essential part of protecting your ability to continue to earn your income (and eventually retire) and helping you protect yourself, your family and your business.
Contact us for a confidential chat about your needs.
Related: Types of Personal Insurance products we work with
Different types of risk protection insurances, provide protection for different life risks.
- Life & Terminal Illness - the basis of all protection strategies
- Income Protection - safeguarding your ability to continue to earn your income
- Total & Permanent Disability (TPD) - protecting against the long-term financial consequences of disability
- Crisis & Trauma Recovery - protecting against specified serious medical conditions (more a 'when' you need to claim than an 'if')
- Severity Based Insurance - designed to pay small claims sooner (Life, Crisis & TPD insurances in one)
