What do workers need to know about income protection?
For most of us, our work provides our financial security. But what happens when you can't work? Whether it's from an injury or ongoing illness, there is always the chance that circumstances arise that prevent you from being able to work.
And when that happens, your financial security can come under threat. But with the right financial planning and insurance put in place, you are actually able to protect yourself from ever coming up short when you're unable to work. This is called income protection insurance, also known as accident and sickness or salary continuance.
What is income protection?
Income protection is essentially a type of insurance that directly covers your wages.
Income protection is essentially a type of insurance that directly covers the loss of wages or salary. When you can't work for a specific reason, it comes into play providing an income stream in lieu of your normal earnings. In most cases, it will account for between 75 and 85 per cent of your earnings.
A waiting period will apply. The waiting period is the specified time you will need to be off work prior to being eligible to receive payments. Waiting periods usually range between 14 days and 90 days. The longer the wait period, the lower your premiums are likely to be.
How long does income protection last?
The length of your cover (benefit period) depends on the type of income protection insurance you take up. Most policies provide cover for either up to 2 years or to age 65. The longer the benefit period, the higher the premiums are likely to be.
Other factors to consider
You will also have to take into account a few other factors. Your personal circumstances should also be considered. Access to emergency funding and accrued leave may enable you to adjust your waiting and benefit periods and reduce your premium.
It is important to be aware that all policies will have certain conditions, limitations and exclusions which may vary between policies and insurers.
Like with any other kind of insurance, you have to provide evidence of illness or injury for the claims to be processed.
How do you get income protection?
As it is essentially part and parcel of your normal insurance, income protection can be secured a number of ways. It can accessed through your superannuation, via your employer or taken up personally. It can be arranged by either your financial planner or an insurance broker.
If you're unsure of how to make income protection work for you, then feel free to get in touch for a consultation.