Why should I take out income protection insurance?Income-Protection-Newcastle-Financial-Planning-BMK

Client: I have been advised to take out income insurance but I wonder why I should when I have sick pay and Workers Compensation coverage at my workplace? I am suspicious of most insurance – should I be with income protection insurance?

Income protection insurance covers you if you have an accident and you can’t work. Most policies will cover up to 75 per cent of your salary. Some will go as high as 85 per cent but the extra 10 per cent goes into your super.

There’s a waiting time of 14 days up to two years and the longer the waiting period, the lower the premiums and you can get them to cover you to 65 years of age and some will go to 70!
It’s important to work out what the agreed salary definition is as this is important to the policy, the premiums and whether it works for you if something goes wrong. If your job includes bonuses and commissions, then you need to get an idea of how they will be handled.
There are some traps with these policies, so make sure you know all of the fine print. Some will only pay out if you can’t do a similar paid job. Also, make sure that the policy is indexed for inflation.

Basically, if an accident ruins your family life and it means you can’t meet important payments such as home loans or school fees, a policy like this makes good sense. Sick pay only lasts a short time and Workers Compensation won’t last to the day you retire. In fact, check out your Workers Compensation and that will make you think hard about income protection. Also, having a total and permanent disability protection policy with a life insurance policy can be very limiting and that’s why many advisers encourage their clients to take out income insurance.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

For more Income Protection information and advice Contact Brad – 0423 621 120 or email at brad@bmkfs.com.au