Income Protection: What it is and how it helps you
Many might consider a house, a car or even savings as their greatest financial asset. More often than not, however, it’s your ability to earn income that’s greater than the others combined.
While we insure our cars, houses and other possessions, surprisingly only 31 per cent of Australians insure their greatest financial asset; the ability to earn income. Consider then that if 69 per cent of people don’t protect their income, is income insurance really that useful? And if over two thirds of Australians aren’t protected, why should you be?
How Income Protection works
In short, if you or a partner were off work for a prolonged period of time due to sickness or injury, and unable to support your current lifestyle and household expenses, then income protection is going to be useful.
For many, however, the likelihood of having to use their income protection is not enough to assure them that the cover is worthwhile.
Why pay for something I might not use?
Sixty per cent of working Australians will at some stage need to take a prolonged break from work as a result of illness or injury. There is a high likelihood that yourself, or someone you know, will be affected by being unable to work.
As with many other forms of insurance, income protection is in place for peace of mind in case the worst should happen. Six out of 10 Australians will be able to use the cover at some point in their working life. Back and spine-related injuries, paired with stress-related illnesses, rank close to the top of the claims tree.
But WorkCover has got me, right?
Government schemes such as WorkCover are limited to only protecting you from accidents and illnesses that happen in the workplace. Did you know that WorkCover claims only pay for expenses related to the injury or illness, not loss of income to cover additional household expenses such as the mortgage, bills and childcare needs?
I can’t afford it…
Income protection can be tailored to suit your budget and premiums are also fully tax deductible. If you’re earning over $80,000 per annum, you will be paying approximately 39 cents in the dollar tax, as the premiums for income protection are fully tax deductible. So ultimately, you are only paying 61 cents in the dollar of the premiums and the ATO are helping out with the rest.
Again, when you earn over $180,000 per annum, the tax deduction is greater than 50 per cent, so again you are only paying for half of your policy after your tax deduction.
You can pay your premiums monthly or annually, meaning if you are searching for a tax deduction prior to the end of this financial year, an annual payment may suit your planning.
Can I afford not to have it?
For the 31 per cent of Australians that have purchased income protection, there are several attitudes that provide insight in the value offered by it. Ranking highest of these, is the understanding that suitable cover can protect your family and the life you have created for them.
For others, income protection is a useful addition to long term financial planning, providing assurance that the goals for your financial portfolio can be met. When we build a wealth creation or retirement plan for a client, a gap in income can mean a delay of months or even years to meet a certain goal.
Income protection can also be used to top up on existing insurance cover, giving you confidence you have the right level of cover to meet your needs.
Yet, most importantly, in the even that you do find yourself unable to work, income protection provides you with options. Valuable options that allow you to choose how you allocate your income, giving you peace of mind to focus on recovering rather than finances.
So if income protection sounds like something useful for you, this will ensure that you get the right level of cover and benefits to suit your needs.
Oncore contractors and career contractors
If you’re worried you can’t get coverage based on your employment and contract history, it’s definitely worth you time to investigate, as we have been successful time and time again in gaining sound coverage for contractors. Also, you may be able to expense process your income protection premiums whilst you are with Oncore, and get the tax benefit straight to your back pocket. Contact your Client Service Manager at Oncore to discuss.
Visit the Oncore Wealth Solutions website for more information.