Income Protection provides replacement income when you cannot work due to sickness or injury. It is arguably the most important of the 4 main types of Personal Protection insurance. Consider the following statistics:
- 1 in 3 Working Australians, at some stage in their career, will be off work for at least 3 months due to illness or accident. (Source: Australian Institute of Actuaries, 2000)
- The average Income Protection claim for males is 10 months and for females is 11 months. (Source: AMP, Sept, 2011)
Ask yourself … How long could you continue to cover all your outgoing expenses if all or part of your income stopped tomorrow?
If you’re like most Australians, the answer is somewhere between 30 and 90 days.
Income Protection insurance is designed to protect Australian’s from financial hardship when injury or sickness causes a short or long term drop in income. The following are some of the key benefits of Income Protection insurance:
- Cover up to 75% of your gross salary
- Benefit period (the duration for which you’ll be paid) can be up to Age 70
- Premiums are tax deductible
- Payments increase each year to keep pace with inflation
Unfortunately, standard Income Protection policies do NOT protect against loss of income when unemployment is caused by non-medical factors, e.g. if you lose your work due to unfavorable economic conditions. The best protection against this type of unemployment is to self-insure, by building up a savings “bucket”, which can be accessed in an emergency. Building a surplus of savings is also a great way to reduce the amount of personal insurance you require.
More details about Income Protection insurance can be found throughout this site. Alternatively, one of our Personal Insurance specialists would be happy to answer any questions you have.