Having an income is great, it allows you the freedom to maintain the necessities in life, such as pay the bills, buy the groceries, look after family, and pay for your home or car. Without money coming in we put ourselves at risk of losing our assets and struggling to keep up with bills.
If in the terrible event that you became ill or suffered from injury which prevented you from working, what would you do for money?
Unfortunately, many Australians underestimate the value of income protection cover. The Financial Services Council of Australia tells us that only 33% have protection for their hard earned money!
We often make sure we have insurance for our car, or home and the items inside, however we fail to insure what is actually paying to keep these things in our lives – our incomes.
We have compiled four reasons why you need to add Income Protection Insurance to your policies now.
1. Freely choose your level of Income Protection Cover
Income Protection Insurance means you have an ongoing replacement income over the time you are off work due to sickness or injury. This will help you soundly manage your finances and ensure that bills are paid for.
The freedom of Income Protection Insurance allows you to make decisions regarding:
- Your waiting period – the length of time you wait before you start accruing benefits.
- Your benefit period – you can choose periods of payment to extend to two, or five years, and even up to the age of 65.
- How much of your income you would like to insure – you can choose a smaller percentage or up to 75% of taxable income.
- You can choose an index-linked policy to keep up with inflation
- You can choose the frequency of payment, monthly, half yearly, or yearly.
- You can choose if you would like an agreed upon policy, or an indemnity policy
Having this freedom means that you will be able to control to a degree the level of your Income Protection quote.
2. Benefits can be set up as Agreed or Indemnity policies
You will have the choice between policies where the amount you agreed upon at the start of your policy is the amount which you are paid out for, or a policy where the amount you are currently earning is the amount your claim is based on.
An agreed-upon policy can suit those with a fluctuating income or those who are self-employed. You will have to prove your income at the time of application for this type of policy. It will cover you regardless of your employment status, whether you took maternity leave, were off work, or worked part-time at any stage resulting in decreased income.
The opposite style to agreed-upon Income Protection Insurance is an Indemnity-style. This can be less expensive and you will be insured for the amount you say you earn. If you later make a claim you will need to prove your income at the time of the claim. The Indemnity style can usually suit those with a stable and predictable income and helps to save on their premium rates.
3. You will be able to sustain yourself
Income Protection cover allows you to have a steady stream of income should you no longer be able to work. You can work out a baseline for your expenses by asking yourself:
- What are the costs of meeting your mortgage repayments or rent?
- Do you have any other debt repayments such as car or personal loans?
- Do you currently provide for your spouse, children, or other dependents as well?
- How will you maintain your assets and investments?
- What other bills do you need to pay such as phone, groceries, or utilities
A financial advisor will be able to inform you what other expenditures you might need to consider.
4. Income Protection Insurance premiums are tax deductable
Did you know that in most cases Income Protection Insurance is also tax-deductible? You may be eligible to claim your Income Protection Insurance in your business tax return. If you are unsure, it is best to seek advice from your financial advisor or accountant.
You can speak to one of Trade Covers’ team members today regarding your income protection cover and competitive income protection quote. We can help you choose the right level of cover by combining all of the above information about your expenditures, income, and benefit periods, with your age, sex, gender, health, and occupation.
With the right planning you can save yourself from financial disaster.
Call (08) 9312 7955 today.