Insuring your most important asset - Part 2

How income protection insurance can help you to enjoy the special things life has to offer

Sometimes it’s the simpler things in life that give us the most joy. A comfortable home to live in, family and friends around us and perhaps an interesting hobby to while away a few spare hours each week. Fundamental to being able to enjoy these simple pleasures is knowing our day-to-day living expenses can be provided for. 

While it’s commonplace for people to insure their cars and other possessions from damage and theft, few people consider that their most valuable financial asset is the ability to earn an income. While it’s a thought no-one likes to consider, would you be able to meet your usual living expenses plus medical costs if you were out of work for a prolonged time? With recent statistics showing that the majority of Australians have limited resilience to financial stress based on their current savings rates, one of the ways to enjoy peace of mind with whatever the future may bring is to insure your income.

With almost one in three men and one in five women aged over 45 in Australia retiring due to ill health¹, it’s a confronting reality to consider that losing the ability to earn an income could happen to anyone. And with one in two men and one in three women being diagnosed with cancer before the age of 85², this means income protection insurance could be an important part of your financial security. It’s a common misconception that workers compensation or sick leave will cover the costs if you are off work for a while. Sick leave is generally only available if you are off work for a week or two at most, and to claim workers compensation, the illness or injury must have occurred at or due to your work.

What is income protection insurance?

Having income protection insurance means that you can receive a fixed monthly payment (usually up to 75% of your monthly income) if you are unable to work due to a temporary sickness or injury. The proceeds are paid after a specified time following the illness or injury, and for a period stated in the policy up until you are ready to return to work.

This insurance is usually available from age 18 through to 65, and can be established in or outside of superannuation. Cover for business overheads is also available for self-employed people, which pays for the fixed costs of running a business while you are off work. This is another benefit that can reduce the stress, helping to assist in recovery.

Tax treatment

Income protection insurance enjoys certain tax advantages over most other types of insurance, because its purpose is to protect your income. The premiums paid for income protection insurance are generally tax deductible. In the event of a claim however, the proceeds will be subject to income tax, in the same way that your income would have been. 

The value of protecting your income

One of the key benefits of income protection insurance is that it offers cover regardless of where you are or when you become incapacitated. You are even covered on holidays, anywhere in the world. The great thing is, some policies may also cover you if you are between jobs or on leave. 

Income protection can provide also cover you for a wide range of additional benefits, depending on the type of policy. These include:

• Rehabilitation
• Nursing care
• Counselling
• Transport
• Accommodation

These additional benefits are generally only available for non-superannuation policies.  

We can help you get the right income protection cover for you, allowing you to continue enjoying life safe in the knowledge you are shielded against things that might happen tomorrow. Now that’s a good feeling. 

If you would like to know more about how income protection insurance can help you enjoy the special things in life, contact our office.

Sources: 

1. Australian Bureau of Statistics (2009, December), Retirement and Retirement Intentions, Australia, July 2008 – June 2009, catalogue number 6238.0 (www.abs.gov.au)

2. Cancer Council Australia (2010) Facts and Figures (www.cancer.org.au)

3. BT Financial Group.