If you don’t have income protection, you’re not alone – research from Griffith University research suggests underinsurance and low financial literacy is common among Australians.
The good news is that it’s surprisingly affordable – sometimes costing as little as a cup of coffee every day – and isn’t that complex as insurance goes. So if you’ve arrived at this article with a vague notion that you probably should protect your future, read on.
Below we’ll give you a crash course in why you might want to consider it (or just click on your age below if you just want a quote and feel confident you know what you want).
What is income protection?
Income protection is one of those types of insurance that does what you’d expect it to do. It provides you with monthly repayments for a set period of time that replace a portion of your income if you’re sick or have an accident and are unable to work.
This means you can still pay your rent or mortgage repayments, put food on the table and generally maintain your standard of living even if you don’t have a regular income coming in.
Even if sorting out your personal finances feels a little overwhelming, this is a relatively simple way to protect your future self without spending hours pouring over bank statements and what you’ll need to be earning in five years time. How? Read on.
So why is income protection a good idea?
Here’s a question to ask yourself: what if you become sick or have an accident and can’t work for six months?
Income protection insurance takes the stress of worrying about money away and gives you a clear answer to this question – you should be okay financially.
If you’ve got dependents, debts, have a mortgage, are self-employed or run a small business then this form of insurance could be particularly useful. These are all everyday scenarios where a sudden and unexpected loss of income could cause a lot of financial stress.
That’s the benefits. So, how does income protection actually work?
You receive payments, normally about 75% of your income, while you’re unable to work. This is for a set period called the benefits period – which can range from one year to the point you reach age 65 years.
A quick note: most illness or injury will need to be covered by this policy and it doesn’t cover pregnancy or redundancy. There’s also a short waiting period before payment can start, although these can be adjusted when you take out your policy.
We realise we’ve massively simplified this topic, so if you’re somebody who likes to dive into the detail, you’ll probably find our guide to income protection useful.
Don’t be fooled into thinking you’re already covered
Here’s where the lack of financial literacy among working Aussies that so worries our Reserve Bank comes into play.
Many people think they’re already sufficiently covered for sudden accidents or illnesses by workers compensation or their superannuation fund. While it’s true they both provide some cover, they’re not as comprehensive as Income Protection.
Workers compensation, for example, only applies if you’ve suffered an injury at work. If you have income protection through your super fund, you often won’t be able to get specific benefits that a retail policy would offer.
For example, specific injury benefit (where you don’t have any waiting periods) isn’t available inside super funds.
Click here for a full breakdown of the difference in benefits between retail income protection policies and those through your super.
How can I find the best income protection insurance?
This is the question everyone wants answered. The short truth is there’s no one size fits all: you’ll need to look at things like benefit periods, waiting periods, and what illness and injuries are covered before you can be confident you’ve found a policy that fits your needs at an affordable price.
Fortunately, this is what the team at Life Insurance Comparison specialises in. Our experts will look for a range of options across our panel of trusted insurers – and they’ll even take care of the paperwork for you, making that peace of mind you’ve just purchased hassle-free.
Feeling more financially literate in the last four minutes? You can start to find an income protection policy that suits your needs via our comparison tool below. Click on your state to get started.
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You work hard for your income. Isn’t it time to start being smart about protecting your hard work? Income protection insurance can be a worthwhile investment, at just a few dollars a day for most people.
This article is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.
*Griffith University, Insurance Literacy In Australia, March 2017