Have you ever considered how you and your family would be able to afford to pay bills, get food on the table and maintain your lifestyles if you were suddenly left unable to work and your income was significantly affected?
If you answered yes, you might want to consider Income Protection Insurance. It insures policyholders against loss of earnings through injury and illnesses and provides them with a source of income while they’re left unable to work.
What is Income Protection Insurance?
It is designed to replace your income in the event that you’re left unable to work and earn due to sickness or injury. This is paid out monthly and acts as a regular source of income to policyholders, providing them with peace of mind so they can focus on their recovery.
Income Protection Insurance covers up to 75% of your monthly income for a nominated period of time to enable you to continue making any repayments, provide for your family and continue to receive an income.
Who does Income Protection Insurance benefit?
A common misconception about Income Protection Insurance is that it’s only suitable for high-income earners. However, Income Protection Insurance could be beneficial to you if you:
- Come from a single-income household
- Have dependents (such as a spouse and children) whose livelihood relies on you receiving a steady income
- Have debts (including a mortgage) that require frequent and recurring payments to be made
- Are self employed
Do I need Income Protection Insurance if I’m fit and healthy?
Let’s be honest, if you’re fit and healthy, it’s easy to think “I’ll sort insurance out later.” But getting income protection while you’re in tip-top shape is the smartest move you can make.
Why? Insurers love to reward healthy people. When you’re fit and there’s nothing on your medical record holding you back, you could score healthy lifestyle discounts and cover that comes without extra cost (loadings) or annoying exclusions. So, if something unexpected happens down the track, you’re fully covered.
The Australian Institute of Health and Welfare reported in 2024 that over 50% of Australians are living with at least one chronic condition, such as asthma, cancer, cardiovascular disease, diabetes, or kidney disease. According to the Burden of Disease data, chronic conditions are still the leading cause of illness and death in Australia, comprising nearly two-thirds of the country’s total disease burden in 2024. Incidence level and impact remain high; previous rates suggest that over 100 Australians suffer a stroke each day, often resulting in lasting disability or inability to work. Regarding accidental falls, the most recent detailed AIHW statistics list 3,298 deaths due to accidental falls in 2019; this remains a major focus, as falls and their related deaths persist as a significant risk among older Australians.
While it’s hard for an otherwise healthy individual to consider the likelihood of a serious accident or sickness impacting their livelihood and ability to work, it’s important to remember that it is still a possibility – no matter how healthy your lifestyle may be. These statistics serve as a reminder that regardless of your level of health, accidents can happen, and if you’re not prepared for them, you might find yourself paying more or being declined for cover.
To further discuss insurance policies or whether Income Protection Insurance is right for you, get in contact with our experienced financial advisors and life insurance specialists today.
Is there a difference between Life Insurance and Income Protection?
In the event that you pass away or are diagnosed with a terminal illness, a Life Insurance provider will pay a single lump sum to you or your family. This lump sum can be put towards funeral expenses, mortgage repayments or used as a replacement income for your spouse and/or children.
Comparatively, Income Protection will provide you with regular monthly payments to act as a replacement income if you are faced with a temporary loss of work. These payments can be put towards your everyday expenses, such as car repayments, bills, rent and your mortgage.
To put it simply, life insurance insures your life, whereas income protection insures your income. Makes sense!
Is Income Protection Insurance tax deductible?
For most people, the premiums paid for Income Protection Insurance are tax deductible. However, any payments paid to policyholders by their insurance company are classified as personal income. As such, these payments are taxed accordingly.
This article is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. The information in this article has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information in regards to these factors before acting, or seek advice before making any financial decisions.
