Who will pay the bills if you’re sick or injured?
Who will look after your finances if you can’t work due to sickness or injury? Health insurance may cover a proportion of your medical bills, but it won’t cover your rent or mortgage and living costs.
It doesn’t make sense
The majority of Australians have no trouble insuring their home and contents from fire, theft and weather damage. It makes a lot of sense to take out insurance on your home. It’s your biggest asset, right?
The average Australian could earn around two and a half million dollars in their lifetime – much more than the value of the average home. And yet the majority of income earners don’t insure their largest asset – their income earning capacity.
Your home, car, food, clothing, children’s education – all depend on your income. That’s why for many the loss of income resulting from the inability to work due to sickness or injury can cause serious financial hardship. When you think of how your lifestyle could be affected, it simply doesn’t make sense to overlook this important cover.
What is income protection?
Income protection insurance (also known as salary continuance) is designed to provide a regular income in the event that you are unable to work due to sickness or injury. Generally, income protection insurance provides a regular income during a period of disablement for up to a pre-determined and agreed benefit period. The benefit amount payable is up to 75 per cent of your income. Factors to consider:
• The shorter the waiting period and the longer the benefit payment period, the more the insurance will cost.
• Income protection insurance is important when borrowing to invest (gearing), as it can help meet interest payments if you are unable to work due to illness or injury.
• Your insurance cover should be adequate for your needs. Under-insurance can present a serious problem.
Best of all, your premium costs are generally tax deductible – making income protection insurance even more affordable.
What about worker’s compensation?
Workers’ compensation will only cover you for accidents or injuries that occur during working hours or for an illness that is a direct result of your employment. And, if your illness or injury is covered by workers’ compensation, be aware that the benefit is capped under the different state regulations.
It’s not just the bills
When it comes to protecting your income, it’s easy to forget that you’re protecting more than your ability to meet mortgage repayments and put food on the table. Your income isn’t just about the bills – it’s about your future – and how much you enjoy it.
While your medical expenses might be covered by other insurance policies, income protection insurance can be used towards expenses like your mortgage or car payments. Income protection insurance makes sure you and your family don’t have to lose your belongings or your home while you recover and try to get back to work.
How much is enough?
To understand your needs, a financial adviser will ask you to consider the following questions about your future:
• What does the future look like for you and your family?
• What plans are you making together that you don’t want to have to break due to finances?
• Do you have plans to put your children through university, take holidays or buy an investment property?
• How much does your family’s lifestyle cost you each month – bills, mortgage payments, kids activities?
• Do you have savings that you could easily access if you needed them?
Once you’ve started painting the picture of your family’s future and the costs involved in raising a family and reaching your goals, you’ll start to get an idea of how important income protection insurance is to cover those needs. Contact Adviser fp by CLICKING HERE to discuss the merits of protecting your most valuable asset.