What is income protection insurance? Income protection insurance is the protection of any income you currently receive usually being the income from your place of employment, your job. Should you not be able to work for any reason due to illness or injury an income protection insurance company will compensate you and pay up to 70& of your monthly wage for the number of years set out in your insurance policy, there is no set number of years it depends on the insurance company you are with. Income protection insurance is also known as income replacement cover and is often mistaken for sickness & accident insurance.(more on that in future articles)
A major reason why someone would want to get income protection insurance is to protect any investments they have, the home probably being the largest one, if you consider it an investment, some say its an asset, either way people still need to pay the mortgage. All investments require you to put some sort payment into it and if you are unable to do this due to illness or injury then you would have to sell up and all that hard work would be for nothing, income protection insurance protects all the years of hard work you put into your investments.
Would you need and can you afford income protection insurance? If you do not own any investments then income protection insurance is probably not needed, unless you are prone to injury or disease then you may want to consider it. The premium (the amount your pay monthly or yearly to the income insurance company) depends on each particular persons situation it includes their age, type of work as some jobs are more likely to have an accident than others (e.g. office worker and carpenter),and medical history. Also the higher your income the higher the premium will be on your income insurance policy.
Income insurance is very useful for the self employed because if you are employed by a company it is likely they will pay your for your time off during your leave, self employed people dont have this option.
Income Protection is also tax deductable which again is an advantage to self employed people.
Insurance companies in Australia change their premium ratings on a regualr basis so even if you currently have some cover in place,you may be paying too much.
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