If you’ve never thought seriously about income protection insurance, here’s a question to help you figure out if you need it: Do you have enough money saved up to tide you over for a few months or even longer if something happened to prevent you from working?
If, like many Australian families, your answer is no*, then you should most certainly be thinking about taking out income protection insurance. If you have dependents who rely on your income, then that goes double for you.
Income protection insurance can help replace some of the income you could lose if you get injured or sick and can’t work. Whether you’re self–-employed or employed full time, income protection is the cover that can help with bills and expenses while you’re laid up and unable to work.
How does income protection insurance work?
For income protection policies available directly through Choosi, you could receive up to 75% of your income, up to $10,000 a month, if you’re unable to work for an extended period due to sickness or injury.
There are a number of variables to consider when choosing your income protection insurance as these affect the cost of your premium.
You can choose the waiting period, which is the amount of time that needs to lapse following an insurable event, before you make a claim on your policy. Waiting periods are usually 30 or 90 days and the longer you choose to wait, the lower your premium will be.
Claim benefit period
You can also select how long you want to receive payments for when you make a claim. For policies that can be arranged directly through Choosi, the benefit period starts from 6 months, and can cover you for up to 5 years while you recover from your accident or illness.
There are other income protection policies available that have a longer benefit period, for example through Choosi’s adviser partner, there are policies that can cover you up until the age of 70. It’s important to note however that the longer your benefit period, the higher your premium will be.
Other factors that affect your premium
There are a number of other personal factors that could affect the premium that you pay for you policy, these include your:
- Health status
- Smoker status
- Sporting and recreational activities
Income protection for contractors
Income protection insurance is particularly important for contractors who literally are their business. If you’re self–-employed and become injured and are unable to work, not only your business but your very livelihood may be in jeopardy, and without the benefit of sick leave, personal leave or long service leave, you have no safety net to help out.
One type of income protection insurance that contractors may find beneficial is an agreed value policy. This type of policy requires you to prove your income at the start of the policy and insures you for a set amount, which remains the same regardless of any changes in your income. These policies do cost a little more, but your benefit is guaranteed even if your income fluctuates.
Full time employees
If you are a full time employee with a reliable regular income, an indemnity policy, which is less expensive, may suit you better. With an indemnity policy, you are insured for the income you claim to earn at the time of application, but this is simply the maximum benefit payable and not a guaranteed amount. When it comes time to make a claim, you need to prove your income and the benefit you receive is calculated as a percentage of that amount, rather than the amount you originally applied for.
Compare income protection insurance today
If you’re ready to compare quotes for income protection insurance, Choosi is here to help. And as if the benefits weren’t already apparent enough, income protection premiums are generally also tax deductible. So why wait? Contact Choosi today and request your free income protection insurance quotes, or call 13 55 55.
- Third of families living on the breadline, News.com.au
These articles are provided as reference material to allow more informed decision making, but are not intended as being a complete source of information on any topic. All readers should make their own independent analysis on the topic to make sure they have considered the aspects that are important to them.