No plan is complete without adequate Income Protection.
Income protection is exactly what it sounds like – protection for you, and your family, if you suddenly find yourself unable to work and unable to cover the bills. Income protection pays you a monthly amount directly to you while you are unable to produce an income due to illness or injury. Many policies will cover up to 75% of your salary if you are totally or partially disabled. By replacing your regular income, Income Protection payments can help you and your family maintain a level of financial normality.
Income Protection gives you the financial freedom to focus on your recovery or treatment, without worrying about regular expenses.
Income Protection policies are very flexible and can be tailored to suit your individual and family circumstances.
The benefit period is the period during which you receive your income protection payments. You can generally choose between a two or five year benefit period or up to age 70 for some occupations.
Agreed value and indemnity contracts
You can apply for an ‘agreed value’ contract or an ‘indemnity’ contract. An agreed value contract usually means that the monthly payment stipulated in your policy will be the amount you receive if you make a claim. An indemnity contract means the monthly payment will be assessed when you make a claim.
Included and optional extras
Most Income Protection policies include certain benefits at no extra charge, and optional benefits for an additional cost.
Included benefits might be:
- a recurring disability benefit
- a transplant and cosmetic surgery benefit
- a specified injury benefit
- a death benefit.
Additional benefits might include:
- day 1 accident cover
- cover for business expenses.
How much is enough?
How much Income Protection insurance you require depends on a number of different factors. The maximum you can insure yourself for is 75% of your gross income. Premiums for Income Protection are generally tax deductible. However, tax is payable on benefit payments. Your financial planner will be able to help you determine the appropriate level of cover to insure your income.