Life is full of ups and downs. There are beautiful, positive moments but the bad times can weigh heavily on us. Unfortunately no one can predict the future, making it difficult to navigate life’s highs and lows. Fortunately, we’re not powerless to protect ourselves and our loved ones from the financial hardship often associated with unforeseeable tragedies such an unexpected illness, injury, accident or death. Every year millions of Australians make a conscious decision to take out, or maintain, life insurance, which includes income protection, to protect their way of life and underpin their future happiness.
What is it?
Income protection insurance replaces up to 75% of your monthly income if you have to stop work due to illness or injury. The monthly benefit will typically commence after a specified waiting period. In addition to a regular income, many income protection policies feature other benefits that help you return to work sooner by providing rehabilitation or retraining support.
People who are out of work for more than three months are between four and ten times more likely to suffer from depression and anxiety *
In some circumstances you can also return to claim (after going back to work) without having to undertake another waiting period. This recognises the increasing evidence that returning to work is an important part of the recovery process and can assist with mental health and overall well-being.
Why is it important ?
Think about your current lifestyle and future goals and aspirations. If you became sick or injured and unable to work, what savings and resources could you draw on to cover your expenses ? Would you be able to pay the mortgage or rent ? How would your plans for the future be jeopardised ? Sadly, sickness and injury are part of life and they occur all too frequently. Consider back pain, which the World Health Organisation says is the leading cause of activity limitation and work absence throughout much of the world. ** In serious cases, people are unable to work for an extended period of time.
For those with income protection insurance, they can rely on a monthly benefit payment which provides a great deal of comfort. Instead of stressing about money, they can focus on getting well and back to work. It also means they don’t have to dip into their savings or sell other financial assets.
Unlike other types of insurance, income protection premiums can be tax deductible too which is an added benefit.
What can it be used for?
Monthly income protection benefits can be used to meet ongoing living expenses and financial commitments like rent or mortgage payments, household bills, food, school fees, car expenses and other debt repayments.
* https://www.racp.edu.au/docs/default-source/advocacy-library/realising-the-health-benefits-of-work.pdf
** https://www.who.int/medicines/areas/priority_medicines/Ch6_24LBP.pdf. Retrieved 13 February 2019
This information is current as at March 2019. This article is intended to provide general information only and has been prepared without taking into account any particular person’s objectives, financial situation or needs (‘circumstances’). Before acting on such information, you should consider its appropriateness, taking into account your circumstances and obtain your own independent financial, legal or tax advice. You should read the relevant Product Disclosure Statement (PDS) before making any decision about a product.
