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What is Income Protection Insurance? Why do I need one?

Just as you protect your home and contents, work tools, or fleet of cars against unforeseen events, why not extend the same level of protection to your most important asset – your income? Income protection insurance is a safety net that provides financial security during times of illness or injury, ensuring you can maintain your lifestyle and still meet your financial commitments.

With income protection insurance, you gain a strong sense of security, knowing that even if you’re unable to work, you and your loved ones will be financially secure. This can include covering everyday expenses such as mortgage repayments, utility bills, groceries, and other living costs. It ensures that your financial obligations are taken care of, allowing you to concentrate on getting back on your feet.

What is Income Protection Insurance?


At Morgan Insurance Brokers, we not only help you find the perfect coverage – we’re partners in securing your financial future. That’s because, with income protection insurance, you continue to receive a significant portion of your income while unable to work. This allows you to focus on your recovery without the added stress of financial worries.

What Does Income Protection Insurance Cover?


Income protection insurance covers a portion of your income if you’re unable to work due to illness or injury. It typically covers up to 70% of your pre-tax income, paid in regular instalments.

What are the Benefits of Income Protection Insurance?


Income protection insurance offers numerous benefits that make it a vital component of your financial planning. These benefits include financial stability, reduced stress, flexible policies, peace of mind, and, generally, a tax deduction for your premiums.
  • Increased Financial Stability: Ensures a steady income stream when you’re unable to work due to illness or injury.
  • Less Stress & Worry: Alleviates financial stress during recovery, allowing you to focus on your health.
  • Flexible Policies: Coverage can be tailored to suit your individual needs and circumstances.
  • Peace of Mind: Assures that you and your family will be financially supported during difficult times.
  • Tax Deductibility: Premiums for income protection insurance are generally tax-deductible in Australia, making it a cost-effective option.

How Does Income Protection Insurance Work?


Income protection insurance works by replacing a portion of your income if you’re unable to work due to a covered illness or injury. The process typically involves the following five steps, from deciding on a policy to receiving payments whilst unable to work.

Income protection insurance works by replacing a portion of your income if you’re unable to work due to a covered illness or injury. The process typically involves the following five steps, from deciding on a policy to receiving payments whilst unable to work.
  • Deciding on a policy: Choose a policy that suits your needs and complete the application process, which may include a health assessment.
  • Paying Your Premiums: Pay regular premiums to maintain your coverage.
  • Making a Claim: If you cannot work due to illness or injury, simply submit a claim to your insurance provider (we can help with this process).
  • Assessing Your Claim: The insurer assesses your claim, which may include medical examinations and documentation.
  • Receiving Regular Payments: If your claim is approved, you’ll receive regular payments, usually monthly, to replace a portion of your income.

Factors to Consider When Choosing Income Protection Insurance


When selecting an income protection insurance policy, it’s essential to consider several factors to ensure the coverage meets your needs. These factors range from the amount you’ll receive if injured or unable to work, the time frame for these payments, the waiting period, policy terms, and the type of premiums paid.
  • Benefit Amount: The maximum percentage of your income that the policy will replace.
  • Benefit Period: The length of time the benefit will be paid, which can range from a few years to retirement age.
  • Waiting Period: The duration you must wait before benefits commence after you’re unable to work, typically ranging from 14 days to two years, with common options being 30, 60 or 90 days.
  • Policy Terms: Conditions and exclusions that may affect your coverage.
  • Premium Type: Whether the premium is stepped (increasing with age) or level (fixed).

Do You Really Need Income Protection Insurance?


Income protection insurance is not just for high-income earners or people with dependents. It’s a valuable safety net for anyone who relies on their income to maintain their lifestyle and meet financial commitments. Here are some compelling reasons why you need income protection insurance.
  • Unpredictable Nature of Illness and Injury: Illness or injury can strike at any time, often without warning. Income protection insurance ensures you’re financially prepared for these unforeseen events.
  • Financial Obligations: Most people have financial commitments such as mortgages, rent, loans, and daily living expenses that must be met, even when they cannot work.
  • Protecting Your Savings: Without income protection insurance, you may be forced to dip into your savings or retirement funds to cover expenses, potentially jeopardising your financial future.
  • Supporting Your Recovery: Financial stability allows you to focus on your recovery without the added stress of financial concerns, potentially leading to a quicker and faster recovery.
  • Family Protection: Ensures that your family’s financial needs are met, even when you’re unable to work.

Tailoring Your Income Protection Insurance to Your Unique Needs


At Morgan Insurance Brokers, we understand that everyone’s circumstances are unique. That’s why we offer customisable income protection insurance policies to suit your individual needs. There are many ways to customise your coverage; here are a few options to consider.
  • Adjust the Benefit Amount: Choose a benefit amount that adequately covers your essential expenses for the time you’re unable to work.
  • Select the Benefit Period: Based on your financial situation and future plans, decide how long you want the benefits to be paid.
  • Choose the Waiting Period: Select a waiting period that aligns with your financial buffer and other resources you may have available.
  • Optional Extras: Consider additional options such as increasing claims cover, which can help your benefit keep up with inflation.

Common Myths About Income Protection Insurance

Several myths surround income protection insurance, leading to misunderstandings and missed opportunities. Here, we debunk some common myths about income protection insurance so you can make an informed decision about your situation.

“It’s Too Expensive”

While premiums vary, income protection insurance can be affordable, especially considering the potential financial security it offers. Tax deductibility of premiums can also offset these costs.

“I Don’t Need It Because I Have Sick Leave”

Sick leave benefits are typically limited in duration, whereas income protection can provide long-term support.

“Only High-Risk Jobs Need It”

Illness and injury can affect anyone, regardless of occupation.

“My Superannuation Has Income Protection”

Superannuation policies often provide limited cover, which may not be sufficient for your needs.

Case Studies Highlighting the Importance of Income Protection Insurance


Here are two situations where income protection insurance provided essential financial support and peace of mind to two typical Aussies.

Case Study 1: Sarah’s Story

Sarah, a 35-year-old marketing executive, didn’t consider income protection insurance necessary. However, when she was diagnosed with a severe illness, her sick leave quickly ran out, and she found herself struggling to cover her mortgage and living expenses. Thankfully, she had opted for income protection insurance, and the monthly benefit payments allowed her to focus on her treatment and recovery without the burden of financial stress.

Case Study 2: Tom’s Experience

Tom, a self-employed carpenter, suffered a severe injury on the job, and with no employer-provided sick leave, he faced months without an income. However, his income protection insurance policy provided him with 75% of his regular income, ensuring he could continue to support his family and cover his business expenses while he recovered.

How to Get Started with Income Protection Insurance


Getting started with income protection insurance is straightforward. Here’s how you can take the first step towards securing your financial future with Morgan Insurance Brokers.
  • Assess Your Needs: Determine how much coverage you need based on your income, expenses, and financial commitments.
  • Consult an Adviser: Speak with one of our experienced advisers to explore your options and find a policy that fits your needs.
  • Complete the Application: Provide the necessary information and undergo any required health assessments.
  • Review Your Policy: Ensure you understand your policy’s terms, conditions, and exclusions.
  • Maintain Your Coverage: Keep your premiums up to date and review your policy periodically to ensure it continues to meet your needs.

Why Choose Morgan Insurance Brokers?


Located in Brisbane’s central business district, Morgan Insurance Brokers is well-known for its expert brokerage team and comprehensive insurance solutions. We offer tailored coverage for small to medium-sized businesses and large corporate clients. Our dedicated professional brokers provide dependable, jargon-free advice to meet your needs.
  • Expertise and knowledge in the field of insurance.
  • Tailored coverage for small to medium-sized businesses.
  • Dedicated team for large corporate clients.
  • Comprehensive one-stop insurance solutions.
  • Professional and dependable advice for all business types.
  • Access to over 150 insurers and underwriting agencies.
  • Straightforward, jargon-free service.
  • Exceptional customer service and support throughout the year.

Secure Your Financial Future with Income Protection Insurance


Income protection insurance is a crucial component of a comprehensive financial plan. It provides a safety net that ensures you can maintain your lifestyle and meet financial obligations if you cannot work due to illness or injury. Morgan Insurance Brokers is dedicated to helping you find the right policy to suit your needs, offering peace of mind and financial security during life’s unexpected challenges.

Contact us
and chat with one of our experienced brokers today!
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.


Morgan Insurance Brokers, ABN 28 628 815 074, AFSL 327131

This article originally appeared on Morgan Insurance Brokers and has been published here with permission.

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