This week we're continuing our education theme on insurance, and we'll branch into one of the more common types of insurance, that of income protection. The fundamental starting point with this topic is the notion that our greatest asset is always our own ability to earn an income. It's that income that generally funds everything else in our lives – our other assets, and our paid experiences with our families. So when that income dries up for a period of time, there are often many other knock-on effects.

Income protection is a form of insurance that provides a replacement income stream for a period of time that you're unable to work or generate your own income. The premiums are tax deductible but the insurance benefit amount is taxable at claim time.
This type of insurance can be held both inside and outside superannuation, but we'd always suggest holding a policy outside super is your best option. This is due to the tax deductibility of claims, as well as the ease at claim time. And speaking of claim time, you are eligible to receive a claim payment as long as you've been off work for a certain period of time (this is the waiting period) and you're unable to earn an income yourself during this time. This claim payment will continue for as long as you are unable to work, or for as long as your policy benefit period indicates – whichever is shorter.

Income protection gives you 24/7 coverage, and for this reason, it's important to those people working for wages as well as those people who are self-employed. If you're self-employed, you won't be covered by WorkCover, so an income protection policy is a vital and prudent safety net.
The types of factors that will make your premiums either more or less expensive are your age, sex, occupation, smoker status, and general health. And for this reason, we'd suggest locking in your income protection at a time when your health is most likely to be sound – generally while people are younger.

An income protection policy is a great way to put a floor in any financial plan for those who are earning an income. If you've got an old policy, it may be worth checking to see if a better option is now available on the market, or, it may even be best to stay with your existing cover if you've developed some health issues over the years. Either way, if you'd like a second opinion on this or any of your other insurances, please don't hesitate to contact us.