Benefits of income protection insurance

1. It ensures your income continues even if you can’t work

None of us like to dwell on the idea that we could endure an injury or a critical illness. But thousands of Australians find their lives turned upside down due to a health issue.

In case you have income protection insurance though you can’t work, you could continue to get up to 80 percent of your income.

That means that you can concentrate on getting better instead of worrying about how you are going to cover bills like the mortgage, school fees, groceries, healthcare, or other outgoings.

2. Income protection insurance can be customized

An income protection policy purchased from an insurer (as opposed to income protection given by many super funds) could be adjusted to your unique circumstances.

You can opt to pay a higher premium so that your policy begins paying out two weeks after you make a successful claim, or choose to lower your premiums by extending this period. You can stretch this period.

You can pick. Or one that could offer a monthly benefit until age 65 provided you are still not able to work.

3. You may be able to use income protection insurance to care for a sick child

Not only can you customize your income protection coverage, but you could go for extra features. One of the characteristics that could be available is commonly called Family Care Cover.

Parents whose child suffers illness or a severe injury might want to take time off to take care of them.

However, because the parent stays in good health and capable of earning an income, they generally can’t file a claim against any of the insurance policies.

4. Your income protection premium may be tax-deductible

Premiums for insurance on matters like your property are not tax-deductible.

Even other forms of private key man insurance, such as life cover, TPD (total and permanent disability) and injury insurance which could prevent people from becoming a burden on the welfare system are generally not tax deductible.

But premiums for an income protection insurance policy paid directly by you (that is, one not taken out through superannuation) may be tax-deductible, based on the types of benefits covered.

5. You may be covered for redundancy

If you suspect you would fight to keep up with your mortgage, personal loan, car or credit-card repayments for a month or two after being made involuntarily redundant, then it is well worth considering covering yourself against that.

Based on the kind of coverage you have, it pays a monthly benefit as you stay unemployed but may persist for a specified period, by way of instance, three months.

6. Making a claim is straightforward

If you are out of work because of injury or illness, contact your insurer to notify them of the circumstance. Then it’s typically only a matter of sorting out the paperwork (a claim form, a physician’s report and privacy statement) and providing some supporting information about your earnings.

7. It helps your life get back to normal quicker

Being out of work for even a brief period can have severe long-term negative consequences for many people. The family home might have to be sold, retirement plans postponed, kids sent to various schools, high-interest loans taken out to cover urgent debts, or bankruptcy announced.

It may take years for things to get back to normal. By taking out income protection insurance, you are not just helping to ensure you and your family will be OK as you are out of action, you are also maximising the opportunity of everything fast going back to how it was once you have recovered.