Income protection
More than four out of five Australians insure their car, yet less than a third of us insure the source and support of our lifestyles – our income.
Income protection cover (also known as salary continuance) pays a monthly benefit of up to 75% of your regular income if you’re unable to work due to sickness or injury, so you can still meet your living expenses.
This type of insurance is designed to help you continue paying the mortgage, children’s school fees, phone and utility bills, run your car, buy food and clothes, basically all of your day-to-day living expenses.
When would I need it?
There are thousands of people making Income Protection claims each year. It could be as simple as breaking your arm and not being able to work for 2 months. Or it could be a more serious longer-term illness that means you aren’t able to return to work for a long time, if ever again.
The AMP.NATSEM Income and Wealth Report1 highlights key health issues in Australia and the effect these have on income. Some of the key findings from the report are:
- More than half of the Australian population suffer from a long term or lasting medical condition.
- Long-term disability and inability to earn an income other than from government benefits could cost a middle-income family almost $1 million in lost income over 20 years.
- A family in the highest income group can fall to the lowest income group as a result of a disability.
Won’t my sick leave cover me if I can’t work?
This really depends on how much sick leave your company gives you each year. For most employed people this is probably about 10 days or 2 weeks a year.
Or if you are self-employed then you know that you obviously don’t get any except out of your own pocket!
Once your sick leave, and any other leave you may have saved up is gone, your employer has complied with their obligations and if you are to keep receiving an income that is solely your responsibility.
You may have personal savings, but how long would these last if suddenly you couldn’t work for an extended period of time?
What about workers’ compensation?
From July 2005 to June 2006, 6.4% of people working received a workplace related injury or illness, with only 31% of these people receiving financial assistance through workers’ compensation.
You may find that even if you are on a workers’ compensation claim the money you are entitled to receive isn’t enough to maintain your standard of living. In NSW the workers’ compensation payments drop significantly after the first 26 weeks
How much do I need?
Talking to your Bluefin financial planner to do a proper assessment of your wealth protection needs is a good idea. Generally you can cover up to 75% of your income and could cover extras such as your superannuation payments and nursing care.
What if my circumstances change?
As your life changes so do your insurance needs. There are particular points in your life like buying property, having a child, and getting married, where you’ll find that your financial responsibilities increase. It’s important at these times to review your cover. Your Bluefin financial planner will do a regular review with you to assist you with any changes to your circumstances.
