There are some things in life which need protecting more than others. Your health, home, possessions and, perhaps most importantly of all, your family are all worth looking after, especially if something bad were to happen, but without a source of income, paying for or taking care of all that can be almost impossible to do.
The best way to help protect you from losing vital income in the event of a serious injury/illness is to take out an income protection insurance policy. It provides a regular source of income that will help you to pay the bills, but how does it work, and what separates it from other forms of cover? Here are some need-to-know facts about income protection insurance, and why it could help you.
- Like other forms of cover such as health insurance, income protection insurance will pay off if you suffer an illness or injury that’s so severe that is prevents you from working on a full-time or part-time basis.
- You can insure up to 75% of your regular pre-tax income, although payments are limited to roughly AUS$10,000 per month, and any premiums paid could be tax deductible. This is important to remember before you decide whether you need to take out an income protection policy.
- It’s possible to tailor how often and how long your income protection insurance premium will pay out for. It could pay for a couple of weeks if you’re expected to make a full recovery or for the rest of your life if needed.
- You can choose when your policy starts to take effect. It could be within a few weeks or several months, but it’s up to you. The longer you make regular payments, the more money you’ll have set aside for when it’s needed.
- There’s usually a waiting period before a policy can take effect, and the longer you wait, the less you have to pay each month, which is handy to know if you want to save money.