Income Protection Insurance

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What is income protection?
Income protection is insurance that pays part of your income if you are unable to work due to illness or injury. The payment helps with bills so individuals can focus on their health and wellbeing.

What are the benefits of income protection insurance?
Income protection insurance can help you maintain your lifestyle by replacing your salary loss so you can meet your living expenses and debt repayments. It can also benefit and protect your wealth by reducing or removing the need to sell assets for cash.

What does income protection insurance cover?
Insurance protection pays up to 85 percent of your earnings pre-tax for a specific amount of time if you are unable to work due to injury or disability.

It is important to note that each income protection policy has its own definition of ‘partial’ or ‘total disability’. For more information, always check the insurer’s website or the product disclosure statement for the definition and any exclusions.

The payments are taxable, but tax may not be deducted from each payment. If you are unsure if tax is being deducted, it is important to gain advice to ensure you have enough set aside to pay possible tax liabilities. If paid through superannuation, tax is commonly deducted from each payment.

Do you need income protection?
When considering income protection, you should ask these questions:

Waiting Period
If your claim is successful, benefit payments do not commence immediately. There is a waiting period where no benefit is payable. This period can last as short as 14 days, or take as long as two years.

When choosing the waiting period, please take into consideration any sick leave and related benefits provided by your employer. The premium will cost higher if the waiting period is shorter.

Benefit Period
The benefit period is the timeframe in which the monthly payments will last. Most benefit periods last for two or five years, or up to a certain age. The longer the benefit period means the more expensive the policy. However, this can be beneficial if you are unable to work for a longer time.

How to buy income protection:
You can check if you have income protection through your super fund, as many offer default income protection.

You can also buy income protection insurance from a financial advisor, insurance broker or an insurance company.

Wagtail Wealth can help give you the information you need when deciding on your income protection insurance. For more information, contact us today.

IMPORTANT NOTE: This information is general advice only and does not take into account your personal circumstances, goals and objectives. Therefore, you should consider its appropriateness for your circumstances before acting on this information.

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