What exactly is income protection insurance and do I need it?

Have you ever wondered how you and your family would cope if you had an injury or illness and couldn’t work for several months or even years?

For some people, income protection insurance might be the answer.

So what is income protection insurance?

Income protection insurance (or temporary incapacity or salary continuance insurance) provides cover if you can’t work due to illness or injury. It generally pays up to 75% of your monthly income for your chosen benefit period to help you pay the bills and maintain your family’s quality of life.

Income protection insurance can:

cover daily living expenses, such as the mortgage, groceries, school fees

pay your medical expenses and rehabilitation costs

provide access to support services to help you return to work or find a new job, depending on your insurer

Generally, you can purchase income protection insurance via your super or through a financial adviser for example.

If you choose to purchase your income protection insurance through your super the premium comes out of your super, which is in pre-tax dollars.

Alternatively, if you pay directly, you’ll have to pay with after-tax dollars, but you may be able to claim your insurance premiums on your tax return.

How long do I have to wait to get paid?

Firstly, you’ll need to provide to your insurer all the necessary documents for your claim to be considered, such as your personal details, financial situation and medical information.

Most insurers have a waiting period (usually 30 to 90 days), before they will start paying your claim. You may be able to select the waiting period when you take out the policy. Additional waiting periods may apply when insurance is purchased through your super, so it’s best to check with your insurer.

Is income protection insurance right for me?

Income protection insurance has helped many Australians to get through a difficult time without the added stress of worrying about how to pay the bills and look after their family.

Everyone’s situation is different, so you need to think about what’s right for you.

If you are employed by an organisation, you may already have income protection insurance included in your super (sometimes called salary continuance or temporary incapacity cover), so check with your super fund. Make sure the amount you are covered for would provide enough to cover your everyday expenses, as well as any medical or rehabilitation bills.

If you’re self-employed, you may not have income protection insurance, so you may decide to buy it separately. Check what it covers, how much it costs and how long you’ll be paid for.

Benefit periods and premiums can vary depending on your individual circumstances and the insurer.

Now is a good time to review your income protection situation, speak to us. We’re here to help. Give us a call at 08 82314709 or send us an email at info@centrawealth.com.au

Centra Wealth Group
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Zac Zacharia (Managing Director) has been assisting clients to create wealth and secure their futures for over 14 years.

He is also an accomplished presenter and educator

Co-authoring the popular investment book, Property vs Shares.