How long could you meet all your regular expenses if your salary stopped or your income was halved? Would it be a year, six months, a month?
What sacrifices would you have to make? Would it be little things like birthday presents, or would you have to sell the car, or even the family home?
43% of males and 39% of females over the age of 15 suffered a serious injury or illness over the ten years from 2002 to 2011.1 The result for many Australians is not being able to work and earn an income for extended periods of time.
And for some, the hits keep on coming. 10.2% of males and 8.9% of females experienced a serious injury or illness twice from 2002 to 2011. Worse still, 10.5% of males and 8.9 of females experienced it three times or more.2
Some of us have more on the line if we become unable to work due to injury or illness.
Income protection insurance can provide up to 75% of your monthly pre-tax income, up to $10,000 per month.* Depending on your insurer and your policy, you can choose the percentage of your wage you will be paid, the waiting period before your payments start, and how long you will receive payments.
Income protection insurance might be for you if:
- You rely on your income to pay bills, keep a roof over your family's heads and put food on the table
- You would struggle to meet financial commitments using savings alone, or would like to protect your savings against this sort of impact
- You are self-employed or own your own business
- You could be injured or become sick in a situation where worker's compensation is not applicable
Income protection insurance for the self-employed
The ability to generate an income is everyone's most valuable asset, but the self-employed may have more at stake than your average worker.3 You have invested heavily in your business and may have taken on personal debt to do so. Your business undoubtedly relies on your work to be successful4 and any absence from work could hit you and your family hard.
If you are self-employed with a fluctuating income, some income protection policies can be tailored to suit your individual financial needs. Keep in mind that insurers will generally need you to provide evidence of your income when you claim, and they will generally look to your tax records to confirm that you are earning a taxable income.
Your own business relies on you. If your capacity to work drops due to sickness or injury, income protection can help you protect everything you've achieved already.
Worker's Compensation, Medicare and private health insurance are no substitute
Accident or illness outside of work - even if it affects your ability to work – is generally not covered by Worker's Compensation insurance. While Medicare and private health insurance help cover the costs associated with medical treatment and recovery services5 neither assist with income lost due to incapacity.
Worker's Compensation, Medicare and private health insurance are no substitute for income protection insurance.
No one depends on me, so I don't need income protection insurance
Your expenses might be lower than if you had a family, but they won't just go away.
Income protection insurance allows you to determine the percentage of your wage you will be paid within specified limits, the waiting period before your payments start, and how long you will receive payments. If you only have a few financial obligations, you could opt for a lower level of cover and save on premiums. If you are sick or injured you will be able to maintain your financial independence without having to rely on family or friends, or selling assets to make ends meet.
The cost of cover
When selecting your level of cover, you should consider your average monthly expenditure on essentials - rent or loan repayments, education expenses, bills, and the cost of managing investment assets (such as rental property upkeep). Your premium will vary with the agreed maximum payout length, your earned wage, personal details (including age, gender and occupation) and the selected waiting period, among other factors.
This is general information only and does not take into account your personal objectives, financial situation or needs. You should consider the relevant PDS available on this website prior to purchasing any product. Choosi offers insurance products from a range of brands but does not compare all products available in the market.
* Subject to a maximum of 75% of your monthly pre-tax income at the time of claim.
1. Wilkins, R. 2014, Families, Incomes and Jobs, Volume 9: A Statistical Report on Waves 1 to 11 of the Household, Income and Labour Dynamics in Australia (HILDA) Survey, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, p.26, https://www.melbourneinstitute.com/downloads/hilda/Stat_Report/statreport-v9-2014.pdf#page=26
2. Wilkins, R. 2014, Families, Incomes and Jobs, Volume 9: A Statistical Report on Waves 1 to 11 of the Household, Income and Labour Dynamics in Australia (HILDA) Survey, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, p.27, https://www.melbourneinstitute.com/downloads/hilda/Stat_Report/statreport-v9-2014.pdf#page=27
3. ASIC's MoneySmart, Income Protection, https://www.moneysmart.gov.au/insurance/life-insurance/income-protection
4. ASIC's MoneySmart, Self-employed people, https://www.moneysmart.gov.au/life-events-and-you/self-employed-people
5. Australian Department of Human Services, Medicare Services, https://ww.humanservices.gov.au/customer/subjects/medicare-services
Learn more about income protection insurance