Protecting your HomeIncome
protection insurance protects you against the sudden loss of your
income. Without it, you may not be able to meet your home loan payment
obligations resulting in the loss of your home. Most of us
understand the need to have car, house and health insurance, but
overlook the most important one – income protection insurance. If
you became ill or injured and could not work for 12 months or longer,
could your family survive on your savings? Most could not,
unfortunately. If your primary income is from your personal exertion,
then you should consider this type of insurance. What features should I beware of in a policy?
Make
sure the policy you choose has a broad definition of income and takes
into account sources of income such as car allowance and overtime. If
you're self-employed, you need to be able to cover the running of your
business as well as your salary. Ideally, a policy will also reflect
increases in income in line with inflation. Also make sure the policy
is "guaranteed renewable". This means that the insurer must renew the
policy if requested by the insured, but there is no guarantee on the
premium which will be charged. Also, make sure you are happy with the
policy’s “Benefit Period” & “Waiting
Periods”. The benefit period is the amount of time that the
claimant will receive income supplement benefits. The benefit period
for an income protection policy starts from the expiry of the waiting
period and continues for the period agreed in the policy, as long as
the person continues to be totally or partially disabled. The longer
the benefit period, the higher the premium. The most commonly offered
benefit periods are 2 or 5 years, or until age 60 or age 65. The
waiting period is the minimum number of days the insured person is
unable to work before his income protection insurance policy payments
start. The longer the waiting period, the lower the premiums. The most
commonly offered waiting periods are 14 days, 30 days, 2 months, 3
months, 6 months, 12 months or 24 months. As per any agreement, make
sure you read the terms and conditions and understand exactly how they
apply. Where can I get this type of insurance?
Income
protection insurance is available directly from insurance companies.
You may also wish to use a licenced insurance broker. The benefit of
using an insurance broker is that you can get a number of quotes from a
range of insurers at the same time ensuring you get a choice. How much will it cost?
There
are a number of factors which determine the cost of an income
protection policy. These include your occupation, age, sex, the state
of your health, previous medical conditions and your smoking habits. As
a guide we have put together a brief table on what an accounting clerk
with a current annual income of 45,000 would pay in income protection
insurance premiums with a 30 day “waiting period” and a
benefit period to age 65. Age
30
$34 / month
Age
35
$38 / month
Age
40
$58 / month
Age
45
$60 / month
Age
50
$95 / month Please note: The insurable value is 75% of the current annual income. Income
protection insurance for most people is fully tax deductible. However
when benefits become payable, they are deemed to be a replacement of
your income, and as such are taxed accordingly.
Disclaimer:
No investment advice provided to you.
This web site is not designed for the purpose of providing
personal financial or investment advice. Information provided
does not take into account your particular investment objectives,
financial situation or investment needs.
You should assess whether the information on this web site
is appropriate to your particular investment objectives, financial
situation and investment needs. You should do this before
making an investment decision on the basis of the information
on this web site. You can either make this assessment yourself
or seek the assistance of any adviser.
xLife Pty Ltd ASIC No. 305213 is a Corporate Authorised Representative of Milennium3 Financial Services Pty Ltd.
ABN 61 094 529 987 AFSL No. 244252
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