Income protection insurance
Income protection insurance – also known as “salary continuance insurance”, pays a monthly income benefit to you if you cannot work due to illness or injury. Unlike TPD insurance, income protection may pay benefits for temporary conditions, ranging from weeks or months right up to long term illnesses that can result in the loss of many hundreds of thousands of dollars in income.
Income protection policies can generally cover up to 70% of the pre-tax salary that you earned prior to becoming unable to work due to illness or injury. This can be used to help:
- Service your mortgage
- Service other debts
- Provide ongoing income
Income protection benefits commence after a certain predetermined waiting period so that they can be tailored to fit in with your sick leave provisions. Generally, the longer the waiting period the lower the premium.
Benefits continue while you remain disabled up to a maximum predetermined period. This can be a set number of years such as two or five years, or may be up to age 60, 65 or 70. Generally, the longer the potential benefit period the higher the premium.
Business owners can also take complementary cover known as business expense insurance to help cover fixed business expenses during the period of disability, normally limited to one year.
Income protection premiums are generally tax deductible as an expense incurred in earning your income.
