Why Income Protection Insurance Is Worth Your Time & Money
Most Australians rely on their income for their everyday needs. It is perhaps the most important aspect of our lives – our income – providing us with financial independence and security as well as helping us provide for our families and loved ones. Naturally, we would consider it worth protecting.
To put this into perspective – imagine a situation when your ability to earn an income is hampered. This can be due to an accident or an illness that creates a partial or total disability and an inability to engage in work and be productive. As we have seen umpteen times in the past, this can happen suddenly and without any prior notice.
What happens then, as the financial pressure builds up? Who provides for you and your family as you recover? What if you are unable to recover completely? What about your lifestyle then and the compromises that will need to be made? It all seems quite unimaginable, but is it that farfetched?
Income protection may be worth investigating.
In this month’s blog post, we discuss what’s in the fine print – the factors, the definitions, the exclusions, and the considerations – so you can decide if income protection is worth it for your specific circumstance.
Do you need income protection?
Consider the answers to the following questions to evaluate if you need income protection and if income protection is worth your time and money:
Do you have family members who are dependent on your income? This creates some pressure on your income.
Are you self-employed or a business owner? As a self-employed person, you may not have access to sick leave or annual leave.
Do you have any outstanding payments such as rent, loans and mortgages that you need to pay using your income?
Do you have a lifestyle to maintain such as sport, travel and holidays that require you to spend money?
Do you have any obvious risks you face at work?
Income protection, just like any other insurance, has several aspects and it is important to evaluate your need pragmatically and completely. Towards this, consider talking to a trusted financial adviser for their inputs on the subject.
Do you already have income protection?
If you are unsure about whether you're covered, you're not alone. Around 38% of Australians are either unsure whether they have income protection at all or don't know what they are covered for. You can start by checking your super. Log into your online portal or contact your super fund to find out. Your financial adviser can help you determine whether the level of cover you have is sufficient for your needs or if you need an income protection policy. In any case, take the time to read the fine print.
What about income protection providers?
The main benefit of income protection is that it can keep up to 75% of your pre-tax gross monthly salary coming in until you’re fit to return to work. However, the definitions for partial and total disability may vary between different providers.
It is important to verify trustworthiness, past claims, product disclosure statement (PDS), exclusions as well as definitions before you settle for a provider or their policy. Go through the provider’s website and browse the terms and conditions for exclusions and definitions. (For example, if you have a policy that has been purchased before April 2020, it could have an 'agreed value' cover in place of a cover based on a fixed percentage of your salary). It may also be prudent to talk to a financial adviser about your needs and lifestyle and the suitable options that may be available in the market.
Income protection and COVID-19
Generally speaking, the income protection policy will have a waiting period (that can extend anywhere between 14 days to 2 years before payments start coming through after you suffer from an injury or illness and make a claim). So, if you end up sick with coronavirus, you may be covered under income protection - but only if you're off work for a longer period of time. Also, it is important to note that income protection will not cover you for any losses in income when you are made redundant or unemployed by your employer.
Talk to a trusted financial adviser
The subject of income protection can be complex and confusing. From choosing the right insurer to getting comprehensive cover in place – there is much ground to cover. Ultimately it is about safeguarding what’s important to you. Talking to a financial adviser may be helpful in this matter.
Advisers have qualified knowledge and insight of various providers and their products in the market. They can help you pick and choose the cover that is most appropriate for you given your life stage and circumstances. Advisers provide advice on how to best handle your claim, should the situation occur, and assist you in the process. But above and beyond this, advisers can help you save your money and your time.
At Oakmont Financial Group, we care about your financial future and your peace of mind. We provide personalised financial advice on insurance to suit your life-stage and lifestyle. Talk to us today. We will be delighted to hear from you.
General Advice Disclaimer
The information contained on this website and in this blog-post is general in nature and does not take into account your personal situation or circumstance. It is recommended that you consider and use the information provided responsibly and, where appropriate, seek professional advice from a financial adviser.
Although every effort has been made to verify the accuracy and correctness of information, Oakmont Financial Group, together with our consultants, officers, agents, and employees, disclaim all liability for any loss or damage suffered by any persons directly or indirectly relying on this information.