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Understanding Income Protection Insurance: A Comprehensive Guide
Ensuring financial security is a top priority for you and your loved ones. One of the most crucial steps in achieving this is implementing income protection. This decision can provide financial stability and security when you are unable to work due to illness or injury, whether temporarily or long-term.
How Does Income Protection Work?
Income protection insurance provides you with a regular monthly income for a predetermined period or until you can return to work, either full-time or part-time. Benefit periods typically offer options of 2 years, 5 years, or up to age 65.
Generally, the maximum cover you can apply for is up to 70% of your gross income from employment and superannuation contributions. However, there may be offset clauses if you receive other sources of income, depending on the insurance provider and the conditions outlined in the product disclosure statement.
If your policy includes superannuation contributions, this portion of your income protection will be paid towards your superannuation while you are unable to work fully.
Understanding Waiting Periods
Another critical factor to consider is the waiting period, which can vary from 14 days, 30 days, 90 days, or 180 days from the date of disablement or illness.
It’s important to note that if you take out income protection through your superannuation, the cost of the insurance comes out of your retirement savings. This approach minimises the impact on your current household expenses but does affect your overall retirement savings.
Additional Considerations
Depending on your insurance provider and whether you are classified as a ‘White Collar’ or ‘Heavy Blue Collar’ worker, there may be additional qualification requirements to make a successful claim.
To ensure you have the right policy tailored to your individual needs, be sure to contact Morgan Insurance Advisors.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
All information above has been provided by the author.
All information above has been provided by the author.
Morgan Insurance Brokers, ABN 28 628 815 074, AFSL 327131
This article originally appeared on Understanding Income Protection Insurance: A Comprehensive Guide and has been published here with permission.
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