Income protection insurance is your stairway to a safe future. It’s relatively simple, as explained by Macquarie. “It pays you a percentage of your salary (normally 75%) while you’re unable to work due to illness or injury. There are two key variables – waiting period (normally a choice between 30, 60 and 90 days) and benefit period (normally a choice between two years, five years and to age 65). For example – if you choose 30 days/five years, your income protection will kick in after you’ve been off work for 30 days and will continue paying 75% of your salary until you return to work or for five years, whichever is sooner. That means it will stop after five years, even if you still can’t work.”
When talking to Australian working professionals, it’s clearly evident that they place great importance on insuring their car and their homes and other incidentals. However, without a steady and regular income stream being generated in the unlikely and untimely likelihood of extended illness or inability to work, what coverage is in place to mitigate the potential loss of income and what this will do to your broader life needs?
If you are in a white-collar position, that is, a role which is office-based and doesn’t require manual labour or overt physical activity, you may be questioning the importance of income protection insurance for your scenario. Interestingly, according to a Lifehacker article which discussed research conducted by AIA Australia, “tradie” jobs don’t even make up the top three occupations for income protection claims over the past financial year. Instead, they were a sales assistant, general clerk and shop manager. Some of the more common income protection claims relate to musculoskeletal conditions or injuries related to bone conditions, including arthritis and connective tissue concerns.
Cancer diagnosis and mental health are also amongst the most common causes of income protection claims in Australia.
Forbes have gone to great length to advocate for comprehensive insurance coverage to support different life stages and income variables. “You’ve invested years of hard work, time and effort into building the life and career you have today. Putting the appropriate coverage in place now will help you rest easy knowing that your loved ones and hard-earned assets are protected against the unexpected. As your needs become more specialized and as your financial situation evolves, it will become even more important for you to involve a professional or team of professionals, who can help you address the available options and make sure your coverage continues to protect you and your family.”
Macquarie believe that “health insurance is a good start but it doesn’t complete your financial security.” Their website states that “the income you generate every month is what makes your entire lifestyle possible. Without it, things get very difficult, very quickly. Ask yourself – how long do you think you could continue in your current lifestyle with zero income? A few months? More? Less? How drastically would you need to change your lifestyle to manage without an income? Do you want to be forced into making those changes while you’re coping with an extended illness or injury?”
According to a UK-based 2017 Wealth & Protection Survey, it was found that “only 37 per cent of working people had life insurance, despite the fact 62 per cent had children and 43 per cent still had a mortgage. Meanwhile, only 11 per cent had critical illness cover and just 6 per cent had income protection. Unfortunately, there is a 20 per cent chance of the average person being out of the workforce for three months or more due to ill health.”
As Australians, we have a critical opportunity to lead the way globally on securing a smarter future for our families and children by building a stairway to a safe future. Ensuring you have comprehensive income protection insurance which grows in alignment with your remuneration and wealth components will ensure you can sleep easily at night knowing that your lifestyle will remain consistent in the unlikely event that you are unable to work for a period.
NB – This article does not constitute financial advice or guidance and is for general information purposes only. If you would like to discuss your income protection strategies and requirements, please contact your Financial Adviser accordingly.
