This guide explores how to secure your financial future by navigating the complexities of income protection insurance and current Australian industry standards.
Here are the topics we cover:
- Understanding how indemnity value affects your claim.
- Coverage limits and duration of benefit payments.
- Choosing waiting periods and benefit period lengths.
- Important tax and superannuation considerations for premiums.
Your ability to earn an income is a privilege and asset that is easy to take for granted. However, circumstances could drastically change in the event of an illness or injury. In Australia, income protection insurance serves as a vital safety net, providing a monthly benefit if you are unable to work. Blue Diamond Financial shows you how to navigate various factors to select the best income protection policy in Australia.
What is income protection insurance?
In Australia, income protection insurance covers you when you are suddenly unable to work due to unforeseen circumstances like injury, disability or illness. It provides a cushion in those uncertain times so that you and your loved one will still have some form of income to survive. Remember that it only covers part of the income that you lost and not the full amount.
How to find the best income protection policy in Australia
Consider the following points when deciding on an income protection policy:
Understand indemnity value
Indemnity value means that the money you will receive is calculated based on your actual earnings in the 12 months immediately preceding your claim. If your income fluctuates, ensure the sum you are insured for accurately reflects your current lifestyle.
What is covered and for how long?
Carefully assess what your policy covers and for how long. In Australia, income protection insurance typically pays up to 90% of your pre-tax income for six months, and then pays up to 70% only for a specific period of time. Some policies do not cover pre-existing conditions so check the fine print.
Waiting period and benefit period
Premium costs are influenced by the waiting period and benefit period:
- Waiting Period: The period you must wait after becoming disabled before payments commence (e.g. 30, 60 or 90 days).
- Benefit Period: The amount of time for which payments will continue. Beneficiaries usually choose between 2 years, 5 years or until you reach the age of 65.
Tax and Superannuation Considerations
Income protection premiums are usually tax-deductible. However, when you receive payouts, they may also be taxed, so speak to your policy advisor to understand the tax implications.
Your dedicated income protection partner
If you are self-employed and do not have sick or annual leave and if you need your income to support your family or pay off debts, you will need income protection insurance. We don’t advise you doing this yourself, as there is a 70% higher rate of claim denials. Blue Diamond Financial can help you choose the right income protection policy that meets your lifestyle requirements.
Contact Blue Diamond Financial today for the best income protection policy in Australia and put your mind at ease. Our friendly consultants will provide a listening ear and trustworthy advice to protect your financial future.
