The older we get, the more we seem to keep paying out. From our monthly entertainment subscriptions to our home insurance to our taxes, it never seems to stop. However, there is one thing that some people overlook, and without it, we might struggle to afford everything else. We are talking about Income Protection Insurance.
Income Protection is designed to ensure you will always have a salary, even if you’re unable to work for an extended period due to an accident or illness. In a country where the cost of living rapidly piles up, securing our income against life’s uncertainties is definitely something worth thinking about. Today, we are going to discuss how you, and every Australian for that matter, should be making the most of this fantastic policy.
Safeguarding Your Income
Earning money, or at least our ability to do so, is our biggest asset. Losing even a fraction of our income for a couple of years can have disastrous consequences. If you’re ever struck with a bit of bad luck that stops you from working for a couple of years, you’ll be glad if you safeguarded your income. With income protection insurance, you won’t need to worry about earning, keeping up with bills, mortgage payments, grocery bills, and still being able to enjoy your life. You’ll be able to focus on recovery with absolute peace of mind.
How Income Protection Insurance Works
So, if you’re wondering how it works, it’s really quite simple. Income protection insurance is designed to cover up to 70% of your pre-tax income if you are ever unable to work due to an accident or illness. For as long as you need it, it is there to provide you with an immeasurable safety net that many insurance policies can’t. Furthermore, one of the best parts is that you can customise your income protection policy to align with your specific needs, saving you a small fortune in premiums and ensuring you can always keep up with payments.
Customising Your Policy
One of the best things about income protection insurance is being able to tailor it yourself. This means that you will never struggle to keep up with paying its premiums. Here is how it works:
Benefit amount: You can opt for any percentage of up to 70% of your monthly pre-tax salary. So, if you don’t need a large amount or you would rather play it safe with the full benefit, the decision is entirely up to you. Of course, the lower your payout amount, the smaller your premiums will be.
Waiting Period: You can also pick your own waiting period. This is the amount of time you will wait until your income protection insurance starts paying once you are unable to work. If you have savings, you can choose to wait a little longer and reduce your premiums even more.
Benefit Period: If the cost of monthly premiums has you concerned, you can also choose how long you receive your benefit. Most people choose a 3-year term to keep them a little lower, but most policies allow you to select the period that suits you best.
Know When to Invest
Like most insurance policies, the best time to invest in income protection is when you’re fit, healthy, and earning. This will result in paying much less in premiums and securing a better deal. It is also worth noting that you should review and update your policy any time your financial situation changes. For instance, if your salary increases, you take out a new mortgage, or have a child, it is best to ensure your policy will always keep up with your financial responsibilities.
When to Make a Claim
First of all, you will need to look at the terms in your policy, as there are some that will only cover you if you are unable to work in any job whatsoever, but a decent one will provide coverage if you are unable to carry out your specific role. This is something worth checking before taking it out. As for when to claim, that really is up to you. If you think you’ll only be out for a few weeks, it probably isn’t worth increasing your premiums, but if you feel it is necessary, that’s why it’s there.
A Quick Summary
Income protection insurance is something we all hope we don’t need to use, but it is undoubtedly a policy anyone would be grateful for if they are unable to earn for an extended period. The cost of living in Australia seems to increase every day, and ensuring we have something coming in each month is essential. Throughout our lives, we will all be juggling mortgages, bills, children, and living costs, so it’s worth getting ahead of the game with income protection insurance now.
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