Income Protection: What is it and do I really need it?By iSelect spokeswoman, Jessie Petterd

  • Money
  • Income Protection: What is it and do I really need it?

Taking out Income Protection and Life Insurance is one of those things that you’ve most likely had on your to do list since having your first child..

..but have been too busy raising a family and playing household CEO (plus trying to keep sane!) to even properly think about, let alone do anything about!

Or perhaps you’re like me, awaiting the arrival of your first child and pondering whether life and income protection is really worth it. It’s common for young families to put off talking about income protection and life insurance because understandably they don’t want to think about the unthinkable.

However, once you start a family it’s so important to make sure your loved ones would be taken care if the unexpected was to happen to yourself or your partner.

So, where do you start? We’ve made it easy for you with this simple guide.

What is income protection insurance?

Income protection insurance will replace a percentage of your income in the event that you’re unable to work because of injury, accident or illness. Under an income protection policy, you’ll be provided with an income, generally up to 75% of your gross wages, for a set period of time payable either weekly or monthly which will allow you to recover with better peace of mind.

When selecting a policy, you’ll have the option to choose your benefit period which can range from two years all the way up to 65 years depending on your eligibility. You’ll also have the ability to choose your waiting period depending on your needs, which can be from two weeks up to two years.

A lot of people don’t realise that your income protection insurance premiums may qualify as a tax deduction, which helps make the choice to help protect your income a more affordable part of your monthly budget.

Who needs income protection insurance?

Income protection can be a good idea if:

  •  You’re the sole income earner in your household or if your family relies on your income to pay day-to-day expenses.
  • Those who have regular repayments such as car, mortgage or rent
  • Those who are self-employed
  • You have a specialist occupation i.e. medical profession

If you’re thinking about income protection but not sure where to start looking, iSelect’s qualified life insurance advisers can help you compare your options side by side so that you can choose a policy to suit your needs and your budget*.

What’s the difference between life and income insurance?

Life insurance and income protection insurance do share some product similarities which is why it’s important to ensure you speak to a professional about tailoring your cover to get the most suitable product for you.

Life insurance is designed to help provide financial assistance for your children and other dependants should you pass away, become disabled or are unable to work because of injury, accident or illness. Most life insurance policies pay a lump sum, which helps your family to continue meeting important financial obligations such as mortgage, rent, everyday living expenses, funeral related costs and education fees.

I used to think that my superannuation provided me with sufficient life insurance cover, only to learn that most super funds don’t necessarily offer an adequate amount of cover should the unexpected happen. This is why it’s so important to do your research to ensure you have a level of cover appropriate to your financial situation and lifestyle.

What are the different types of life insurance?

There are four main types of life insurance designed to cover a range of different scenarios:

  • Life insurance. Term life insurance (or death cover) is replacement income for your spouse and dependants. It pays a pre-agreed amount in a lump sum at the time of death.
  • Trauma cover. This is insurance for critical illnesses, such as cancer, strokes and heart attacks. It is paid in a lump sum to help cover medical expenses and ongoing recovery and rehabilitation costs.
  • Total & permanent disability (TPD). This covers you for permanent loss of work due to serious illness or injury. It is paid in a lump sum.
  • Income protection. This provides up to 75 per cent of your regular work income due to illness or injury for a specified period. Unlike other types of life insurance, income protection is paid in regular monthly instalments.

If you’re ready to find the right life insurance policy to help keep you and your family financially secure, iSelect’s qualified life insurance advisors can do the legwork for you. They compare insurance products from a range of Australia’s leading life insurers and can present you with a combination of life, trauma, TPD or income protection policies (or all of them) to choose from.

No one likes to think about the unexpected happening but sorting out your life and income protection insurance really will feel like a weight has been lifted off your shoulders – especially if you’ve been thinking about it for some time now.

Disclaimer:
*iSelect does not compare all life insurers or policies in the market. We therefore don’t compare policies offered by life insurers who are not our providers. We maintain an internal list of approved life insurance policies that our advisers compare from all of our providers. We call this our ‘Approved Product List’. We have commercial arrangements with each of the providers.
iSelect Life Pty Ltd – ABN 89 124 304 347, AFS Licence Number 331128. Any advice provided by iSelect is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice iSelect gives you, having regard to your personal situation, before acting on iSelect’s advice or purchasing any policies. You should consider iSelect’s Financial Services Guide which provides information about iSelect services and your rights as a client of iSelect. iSelect receives commission for each policy sold. Click here to view our range of providers.

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