Do I earn enough for Income Protection Insurance?

Money Management -

Income protection can be the financial safety net you need if you experience an accident or illness that means you can no longer work. 

A common misconception about income protection insurance is that it’s only for high income earners, but this isn’t the case. In reality, not many people could afford to be without this financial safety net, regardless of the amount of income you earn.

The only things certain in life are death and taxes—or so the famous saying goes. Thankfully, income protection insurance can add a positive guarantee to that list by safeguarding your quality of life, should an unexpected setback strike. 

What is income protection insurance?

Income protection insurance is a source of income paid out to you if you are temporarily unable to work due to an illness or injury. TAL’s Lifetime Protection Income Protection Insurance can include accidental cover, illness cover and sports cover so you can help take the financial pressure off your loved ones while you recover and get back on your feet. 

It’s important to note that TAL’s Lifetime Protection Income Protection won’t cover you if you’ve been made redundant or lose your job due to unforeseen circumstances like COVID-19. But it may be there as a financial support if you were to be involved in a car crash that resulted in you being off work for a prolonged period of time or if you were diagnosed with cancer and needed to take time out to focus on your treatment. 

You can’t predict the future, but you can plan for it

Nobody wants to consider an accident or illness impacting their health suddenly, but it’s a very real possibility. As well as changing your lifestyle, an unexpected illness could mean you need to take extended leave from work.

In a 2020 report by the Australian Institute of Health and Welfare (AIHW) on an average day, 100 Australians suffer from a stroke that could leave them permanently out of work. The AIHW also reports that accidental falls were the most common cause of injury deaths . It’s tempting to think that if you lead a healthy lifestyle and make smart choices, you’ll be fine. But the reality is you can’t predict the future, you can only plan for it.

Why it’s not about the amount you earn

One of the biggest myths surrounding income protection insurance is that it’s only necessary for those who are paid high incomes. In reality, anyone who is part of the workforce will benefit from the protection and peace of mind that this insurance provides, regardless of what they earn or their stage of life. Think of income protection as your own personal cavalry ready and waiting to come to your rescue should you need it.

Consider what you and your family would do if you were unable to bring home the same pay cheque overnight. Remember, periods of unemployment due to sickness or injury are reasonably likely over the lengthy course of anyone’s working life.

Why income protection might be right for families 

Parents, particularly single-income families, have the consistent pressure of providing for their children. While it might appear smarter to give precedence to other family expenses, this demographic can be hit hardest in such events, making income protection insurance a consideration is a must.

Why income protection might be right for couples

Another misconception is that singles or couples can forgo income protection. Although finances might be comfortable day-to-day in a steady job, things may not always be so stable. It makes even more sense for the self-employed or small-business owners, whose monthly income can often be inconsistent, to consider income protection.

Why life insurance and income protection are not the same

Then there’s the trap of thinking life insurance is all you need. Unexpected death is absolutely a part of life we should all plan for. But an unforeseen total or partial disability due to injury or illness is a debilitating situation that can stop you earning a living, and is equally unwise to overlook.

Do I need income protection if it’s included in my super?

Most super funds offer income protection insurance for their members which can be a cheaper option. But cheaper premiums can come with a limited level of cover. Moneysmart by the Australian Securities & Investments Commission notes that “insurance premiums through super are deducted from your super balance which reduces your savings for retirement” so it’s important to consider if separate income protection cover is right for you and your family’s needs. For more information on whether life insurance through superannuation is enough, read here. 

What does income protection cover?

So, how does income protection insurance cover you? Up to 75% of your monthly income is provided for a nominated period of time to help keep your household up and running, and provide for your loved ones while you recover. In a nutshell, it gives you the freedom to rest easy knowing you’ll be taken care of financially.

An inability to keep up with the mortgage, loan or credit card repayments can cause considerable stress when you’re unwell. It’s crucial to focus on recuperation at such a time, with full confidence that these debts can be provided for under your policy.

 

Using TAL’s CoverBuilder you can tailor the amount you’re protected for and see the injuries and illnesses for which you’re covered.

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