Do I need income protection insurance?

Income protection insurance can be the financial safety net you need if you experience an accident or illness that means you can no longer work.

A common misconception about income protection insurance is that it’s only for high income earners, but this isn’t the case. In reality, not many people could afford to be without a financial safety net, regardless of their income.

What income protection insurance covers

Income protection insurance is a benefit paid out to you if you are unable to work due to an illness or injury. It can help to take the financial pressure off you and your loved ones while you recover and get back on your feet. Typically, income protection insurance will provide you with regular payments covering a portion of your pre-tax income.

If I'm self-employed can I still get income protection insurance?

Self-employed people are usually eligible for income protection insurance provided they work in paid employment for more than 20 hours per week. In fact, since self-employed people can’t benefit from the sick leave or workers compensation that come with being an employee of an organisation, having appropriate income protection insurance in place can provide important peace of mind and financial security over the long term.

Depending on how you pay for your income protection, the insurance premiums may also be tax deductible. It’s always best to check with your accountant.

Do I need income protection if it’s already included in my super?

Most super funds offer some level of income protection insurance for their members. This can be cheaper than taking out a separate policy, but lower premiums may indicate a limited level of cover. Premiums through your super can also reduce your retirement contributions. Read more on whether life insurance through superannuation is enough.

Why life insurance and income protection may not be the same

When considering your overall insurance cover, it’s easy to assume that life insurance in case of death is all you need. While unexpected death is unfortunately a part of life we should all plan for, being unable to work due to illness or injury is a significant event and one that could leave you and your family without the income you need to keep up with your regular outgoings. Rather than provide your beneficiaries with a lump sum as is the case with life insurance, income protection can provide you with regular payments. This means you can focus on the recovery and rehabilitation you need to get back on your feet and back to work, safe in the knowledge that your living expenses are covered.

Key terms about income protection that you need to know

Benefit period – this is the amount of time that you receive monthly payments for. You can select your benefit period when you apply for a policy, and the benefit period may vary depending on when you are able to return to work. Often it is a minimum of 12 months.

Waiting period – this is how long you need to wait from being unable to work due to injury or illness and receiving an income protection benefit. Generally, if you opt for a longer waiting period you will receive lower premiums. A benefit is usually not paid while you are off work during the waiting period and only start to accrue after the end of the waiting period.

How to choose an income protection policy that works for you

When choosing an income protection policy, you should look at a range of factors including but not limited to:

• Your outgoings and expenses

• How much cover you need if you were unable to work

• How much you can afford to pay each month in premiums

• How long you could afford to wait before receiving the insurance benefits should you need them.

When comparing policies, you should also look at the inclusions and exclusions. You can find out all of this information by checking the relevant Product Disclosure Statement (PDS).

To find out more about TAL’s income protection insurance, see our product page or use our Coverbuilder to design a policy that suits you.

Any financial product advice is general in nature only and does not take into account any person’s objectives, financial situation or needs. Before acting on it, the appropriateness of the advice for any person should be considered, having regard to those factors. Persons deciding whether to acquire or continue to hold life insurance issued by TAL should consider the relevant Product Disclosure Statement (PDS). The Target Market Determination (TMD) for the product (where applicable) is also available. Life insurance issued by TAL Life Limited ABN 70 050 109 450 AFSL 237848.