Our incomes are possibly our most important financial asset, yet very few of us take the time to insure ourselves against the possibility of being forced out of the workforce due to injury or illness.
In fact one industry report has revealed that 83% of Australians have comprehensive car insurance but just a very small percentage have bothered with income protection insurance.
“This situation is probably exacerbated by the traditional Aussie ‘she’ll be right’ attitude but if something unforeseen happens that takes us out of the workplace, it can quickly push us towards a financial meltdown,” says InvestSMART's Managing Director, Ron Hodge. “It also explains why many experts suggest taking out income protection insurance, which replaces a salary, wage and other earnings if you’re unable to work due to injury or illness.”
EPS Property Search director Patrick Bright told Property Observer recently that one of the quickest ways to lose your home is through unpredictable occurrences that stop your ability to earn.
According to Bright, many property investors consider burglary, tenant damage or natural disaster, but then fail to consider the possibility of getting ill. According to ASIC’s Money Smart website, income insurance is especially suitable for self-employed people, small business owners or professionals whose businesses relies heavily on their ability to work.
Also be aware that each income insurance policy comes with its own set of definitions of disability, range of benefits and level of cover – although most policies cover up to 75% of gross wages for a period of time. This could be two years or to age 60, according to ASIC, while waiting times can vary from 30 to 90 days.
Likewise premiums can vary depending on your age, sex, occupation and whether or not you are a smoker, while many super funds offer income protection. To find out more, contact your super fund by phone or through their website.