It is important to consider that one of your biggest assets is the ability to earn income. Therefore it is important to insure our income in the event we lose the ability to earn if for a period of time or for the rest of our working lives. Income protection in Australia is a tax deduction, so although you have to pay a premium to be covered you can get that back.
Like TPD and Trauma/ Critical illness insurance income protection does have terms and conditions to consider, generally income protection will cover you in the event you are unable to work due to accident or illness.
There are several things to consider when looking at income protection. First thing is how long would you consider waiting for your claim to be paid out?
Your claim will be 75% of your taxable income, please be aware it is paid out in a monthly benefit – you choose how long you want the benefit period to be and the wait period to be.
Some companies have a salary continuance plans (similar to income protection) this may have a benefit of 2 years; you may have sick leave or long service leave available should you become sick you may take this before you claim, Or you may have savings for a rainy day – All this needs to be considered when choosing your wait period. A wait period is paid in arrears from the length of time you choose it for example if you choose a 90day wait period then your benefit amount will be paid the month after the 90 days is up – Please be aware that some policies do waiver the wait period in the event of an accident: again you do need consider the PDS before taking out your policy. The choice of benefit period is 2 years, 5 years, till the age of 65 and some life companies are now including to the age of 70 as the retirement age is increasing.
When taking life insurance you must be clear on your occupation and the duties you perform in your occupation. The premium of your income protection is calculated based on occupation class. For example the changes of someone who works on a construction site would be higher to one who works in an office environment, therefore, the construction worker would have a higher premium than the office worker.