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Is Income Protection Insurance Right For You?

Income Protection Insurance insures you against loss of income in the event that you're left unable to work as a result of illness or injury. It provides you with a regular source of income so you can focus on getting better.

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? 

Income Protection Insurance is designed to replace your income in the event that you’re left unable to work and bring home your own income due to sickness or injury. Income Protection Insurance 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 
  • Own your own small business 

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. 

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!

Do I need Income Protection Insurance if I’m fit and healthy? 

The Australian Institute of Health and Welfare reported that almost 50% of Australians are living with 1 or more chronic conditions (including asthma, cancer, CVD, diabetes and kidney disease). In 2020, AIHW also reported that on average, 100 Australians suffer a stroke each day that could potentially leave them permanently disabled and/or unable to work. The same report showed that in 2019, 3298 deaths were attributed to accidental falls. 

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 could be left without an income. 

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. 

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.

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