Income Protection Insurance matters –
getting the best out of your personal risk protection
Income Protection Insurance matters because it provides cashflow certainty at a time when you are unable to physically earn your regular income.
Referred to as Salary Continuance insurance in an employer group/ superannuation context, this insurance provides regular payments for an agreed period of time, starting thirty days after the latter of:
- your successful claim having been lodged; and
- your agreed ‘waiting period‘ has been satisfied.
Why consider Income Protection insurance?
- To provide regular cashflow when the life insured becomes disabled or severely ill; and,
in relevant circumstances
- To ensure that business continuity is catered for even when the owner can no longer run the business.
Income protection insurance matters to, whom?
Unless you are confident that each of the following situations will be in hand during your recovery period, income protection should be in your insurance portfolio: it will matter to your family…
If you suffer an illness or injury that takes you out of work for an extended period will your family be able to
- Meet the monthly commitments to preserve their lifestyle?
- Continue to pay the mortgage/ debt repayments?
- Service the long-term investment needs required to maintain your wealth accumulation strategies?
- Meet all medical costs during the term of incapacity?
- Provide the financial capacity to maintain these situations?
How much Income Protection Insurance is enough?
The amount of monthly benefit to insure for will be governed/ restricted by the level of income you regularly enjoy (although there are a couple of ‘exceptions’ that can apply in that regard). Generally speaking, 75% of regular earnings is the upper limit: in particular circumstances, the insurer will also allow for superannuation contributions above that level; and in others, where very high income earners are concerned, the % of regular income may taper off at the upper levels.
It is possible to insure for a lesser percentage; and determining the appropriate waiting period (how long you need to be disabled or off-work, sick); and the benefit term for which you insure – are important considerations as to the premium (cost) of the protection: and to a lesser extent, the availability of the protection. Some matters that could be brought to account in this consideration include –
- Sick leave
- Special leave
- Existing insurance cover?
Continuum Financial Planners Pty Ltd is available to assist..
If you were unable to answer Yes to the questions above and would like to better secure your/ your family’s financially independent future, phone our office (on 07-34213456) or use the website Contact Us facility to arrange a meeting with one of our experienced advisers. You can be assured of personalised, professional wealth management advice as we listen to your circumstances, we understand your needs and we provide solutions that will keep your financial strategies in focus.
[This article was originally posted in March 2010: it has been occasionally refreshed and updated, most recently, at March 2017.]