What is Income Protection insurance, and do I need it?
What really amazes me when talking about insurance, is people’s automatic acceptance of having to insure their things, but down right reluctance to insure the income that pays for those things.
Remember, if you are earning income for the household, then you’re actually the biggest asset.
You will earn, or have the ability to earn, more than your car or even your home is worth. And we don’t think twice about insuring them. Yet that can all go out the window if you lose your ability to earn.
Income Protection insurance is affordable for most people, especially if you insure for what you need and don’t load your policy up with unnecessary bells and whistles.
Income Protection is also known as Income Cover, Disability Insurance, Loss of Earnings, and can be considered alongside things like Mortgage Repayment and Household Expense covers. Still, they are generally the same concept but can differ with each insurer, and the differences in the fine print for these types of cover can be critical when it comes to claiming.
Will it pay out if I can’t work due to Covid-19 restrictions?
Monthly benefits are designed to pay when you’re unable to work due to accident or medical restrictions, for the most part anyway. There are also benefits such as ‘caregiving’ add-ons to help if you’re required to look after a dependant for a while, and while redundancy packages (with six-month stand-down periods before claimability) are available, they can almost cost an arm and a leg on their own.
How much income protection insurance cover do you need?
It’s a great question, and the answer depends on your needs. For example, your priority could be to make sure the mortgage repayments are paid if you are unable to work, or maybe the mortgage and debt payments, or perhaps you want to insure for as much as you can. It all comes down to priority and affordability.
What are the costs?
Income Protection Insurance premiums will depend on the following:
- Smoking Status
- How long can you wait before the insurer starts paying you
- How long do you want your income replaced, for example, one year, two years, to age 65 etc.
Are there other options available?
There are a few products in the market, and each has a specific job to do, for example, if you wanted to make sure your mortgage repayments are paid for you, then you may want to consider Mortgage Repayment Insurance.
Maybe you are a renter and want the rent paid and some other expenses such as loan repayments, power and phone then Household Expenses Cover may be for you.
Or Income Protection where you can insure up to 75% of your income.
If you’d like to know more, please call you us during business hours on 0508 INNOVEST, or contact your adviser directly.