Why Income Protection Insurance?
Generally, most people think of Insurance for:
- House and Contents
- Motor Vehicle
- Travel Insurance
Most of us recognise the importance of protecting the assets we have accumulated over the years.
Few people consider the biggest asset of all – the ability to work. Your income enables you to own a house, maintain a car and take holidays.
Your most valuable asset
Your ability to earn an income is likely to be your biggest asset in life. A 30-year-old with an average wage of $60,000 can expect to earn over $2,000,000 by the time they are 65.
It’s worth thinking about what would happen to the assets you have built up and, more importantly, your family if you were unable to earn an income. How would you pay for weekly expenses and bills, let alone mortgage repayments and school fees?
Hopefully, you have put away some funds to help tide you over. But how confident are you that your savings will last the distance?
Fortunately, there is a way you can protect your biggest asset. Income Protection Insurance can provide you with up to a 70 per cent replacement income if you are unable to work due to illness or injury.
The benefits are yours to spend as you choose, and premiums are tax-deductible, reducing the overall cost of your insurance.
Will it Ever Happen to Me?
If you’re lucky enough to be fit and healthy, then it’s tempting to think that it will never happen to you. After all, no one wants to focus on confronting issues such as illness or injury. But the unfortunate reality is that misfortune can strike at any age when you least expect it.
In 2007-08, more than 51,000 people were hospitalised due to transport accidents; over one-quarter of those were seriously injured and sustained life-threatening injuries1. One in five stroke victims is aged under 552. And just under half the population with an arthritis-associated disability are aged 15-643.
The best time to take out insurance is when you are in good health. As you age, you can suffer health-related issues, making it more difficult to obtain coverage.
Dispelling the myths
Many people believe they are sufficiently covered elsewhere or that the government will step in. But your safety net may not be as robust as you think.
- Sick leave entitlements: Typically, salaried employees can accrue up to 1 to 2 months sick leave over 4 to 5 five years with an employer. However, this entitlement does not move with you when you change jobs, and a serious injury or accident may mean you are off work for much longer than your sick leave will cover.
- Workers’ compensation: Covers illness and injury associated with the workplace, but many serious accidents occur elsewhere, leaving those without coverage vulnerable.
- Insurance in superannuation: Superannuation plans may provide some insurance cover, but it is typically limited to death and permanent disability.
- Private health cover: This coverage is limited to medical expenses such as hospital stays and does not extend to general living expenses.
- Social security payments: Very restricted and unlikely to allow you to maintain your standard of living.
Income Protection should be an integral part of your overall insurance needs, which can include life, trauma and total and permanent disability (TPD) cover.
AustAsia Group can assist in reviewing your overall asset protection requirements, in conjunction with your retirement plans, and also what happens with your estate in the event of death.
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1 AIHW Injury Research and Statistics Series No. 56, 2007-08, www.nisu.flinders.edu.au
2 National Stroke Foundation, 2010, www.strokefoundation.com.au/facts-figures-and-stats
3 Australia’s health 2008, Australian Institute of Health and Welfare, June 2008
Important information and disclaimer
This publication has been prepared by AustAsia Group, including AustAsia Financial Planning Pty Ltd (AFSL License No 229454).
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information.
Information in this publication is accurate as at the date of writing, 9 April 2024. Some of the information has been provided to us by third parties. Whilst it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way.
Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of AustAsia Group, nor their employees or directors give any warranty of accuracy, nor accept any responsibility, for any errors or omissions in this document.
Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.
