If an injury or illness forced you to take time off work, could you still keep up with your bills?

Income Protection is designed to cover you either temporarily or for the long term if you are unable to work due to injury or illness. The cover is designed to enable you to maintain your day-to-day living expenses during your recovery period.

Most Income Protection policies will, after your nominated waiting period, cover you for up to 75% of your income . Payments are made in monthly instalments until such time as you’re able to return to work or until the end of the prescribed benefit period as noted on your policy. It is worth nothing that this might only be two years if you only have cover under your superannuation fund.

Consider a 35 year old who injures themselves and is never able to return to work. What is the value of a comprehensive Income Protection policy? Well, on a salary of $50,000pa, assuming salary increases in line with CPI at 2.5%pa, then the benefit would be in excess of $2million over the next 30 years to age 65 - $2,195,135 to be exact!

A comprehensive Income Protection policy may also have additional benefits such as extra payments for a specified injury (eg: a broken leg or collarbone), rehabilitation benefits to help you return to work or a nursing care benefit to provide in home care during recovery.

In addition to the benefits provided by this type of policy, Income Protection premiums paid outside of the superannuation environment are also tax deductible. You can claim the premiums you have paid each month when you complete your annual tax return. How much you can claim will depend on your annual income and marginal tax rate.

Whilst it’s unlikely to happen, and hopefully it never will, what would happen to you and your family if you could no longer earn an income? It’s worth some thought don’t you think?

Call the Risk Team today to discuss your income backup plan.