Is it Worth Having Income Protection Insurance? 

Income protection insurance offers a tax-free monthly income replacement if you are unable to work due to injury or medical reasons. This coverage includes benefits for both mental health issues, like stress-related conditions, as well as physical ailments such as back pain, cancer, or stroke.

With income protection insurance, you gain peace of mind knowing that you have a financial safety net to cover your bills during periods of illness or injury. Depending on the policy, coverage continues until you either return to work or reach retirement age.

Here’s how it works – 

Coverage – The insurance typically covers up to 70% of your pre-tax income. However, some insurers may have a monthly cap on the maximum amount they pay out. 

Waiting Period – There’s a waiting period between when you become unable to work and when the payments begin. Longer waiting periods often result in lower premiums. 

Benefit Period – The benefit period is the length of time the insurance company will provide payments, usually ranging from two to five years or until you reach a certain age, like 65. 

Premiums – The cost of premiums depends on factors such as your age, occupation, health, lifestyle, the coverage amount you choose, the waiting period, and the benefit period. 

Exclusions – The insurance doesn’t typically cover situations like deliberate self-harm, suicide attempts, normal pregnancy and childbirth, war, or criminal activities. 

When is it Worth it? 

Here are some scenarios where income protection insurance is worth considering – 

When you have limited savings and/or dependents 

If you have limited savings and people who rely on your income, income protection insurance can help maintain financial stability and cover essential expenses like rent or mortgage payments, groceries, utility bills, etc. 

When you are self-employed or a casual worker 

If you are self-employed or a casual worker without access to sick leave or paid time off, income protection insurance becomes even more critical. It replaces the income you would lose due to an illness or injury, ensuring you can still manage your financial obligations. 

When you have debts are financial obligations

If you have major financial obligations such as a mortgage or rent, car loans, or credit card debt, income protection insurance can help you stay on top of your repayments. It provides a financial buffer, reducing the risk of defaulting on your loans and potentially facing financial difficulties. 

When you work in a high-risk occupation 

If your job involves physical labour, operating machinery, or other high-risk activities, the chances of work related injuries are higher. Income protection insurance can be beneficial in such occupations, offering financial support during recovery. 

When is it No Longer Worth it? 

While income protection insurance offers valuable financial security, there are certain situations that make it less of a priority. 

Sufficient savings and low expenses

If you have a sufficient emergency fund or minimal expenses, and can manage financially for an extended period without your regular income, income protection might be less crucial. This is particularly relevant if you have low or no debts and have no dependents. 

Nearing retirement with ample savings

If you’re nearing retirement and have substantial savings, income protection will seem less appealing. Instead of paying premiums, you might choose to retire early if faced with a sudden health event, choosing to utilise savings for financial support. 

Low-income earners 

If you’re a low income earner, you might not find income protection insurance appealing compared to other types of insurance like Total & Permanent Disability insurance insurance which offers a payout if you are permanently unable to work, regardless of your earnings. This is because income protection insurance often replaces a portion of your income which might not be substantial for low-income earners. 

Why Choose Morgan Insurance Advisers? 

At Morgan Insurance Brokers, our team brings extensive experience, knowledge, and expertise in the insurance industry.

We recognize that obtaining the right income protection insurance can be challenging, particularly when looking for thorough coverage from a reliable provider. That's why we're committed to identifying the best coverage and pricing that fits your individual requirements. With connections to major insurers, our experts are here to help you navigate your choices and make an informed decision. 

Our aim is to assist you in managing your rent or mortgage, handling everyday expenses, and ensuring you don’t have to depend on friends, family, or other sources for financial aid.

by Mojo Dojo

Who Should Get Income Protection Insurance?

Income Protection Insurance in Australia acts as a financial safety net, offering peace of mind by providing income replacement if you can’t work due to illness or an injury. It’s important to note that this insurance covers a broad spectrum of health conditions, not just those related to accidents. 

A few key characteristics of income protection insurance include: 

• It replaces a portion of your income, usually up to 70% before tax. 
• The payout is provided in regular monthly installments. 
• It can be used to cover various financial needs, including medical bills, mortgage payments, utility bills, and even ongoing insurance premiums. 
• It offers flexibility and customisation for you to tailor the policy to your needs and budget. 
• It is especially crucial for self-employed individuals who lack access to employer-provided sick leave or disability benefits. 

It is essential to understand that the cost of income protection insurance varies depending on factors like your age, occupation, health, chosen coverage amount, and the specific policy terms. 

Occupations are categorised by risk levels; for instance, a construction worker would generally pay higher premiums than an office worker due to the higher risk associated with their profession. Policies covering a larger percentage of your income or offering a shorter waiting period comes with higher premiums. 

Do you Need Income Protection Insurance? 

When evaluating your need for income protection insurance, several factors come into play. Some of the factors to consider when determining if you require income protection insurance include: 

• Your employment status 

If you are self-employed or work as a freelancer or contractor, chances are that you lack access to paid sick leave and annual benefits that are typically offered by employers. In such cases, income protection insurance becomes crucial in serving as a financial safety net during times of illness or injury.

• Do you have dependents? 

If you have family members or dependents who rely on your income for support, income protection insurance can provide peace of mind, knowing that their financial well-being is protected even when you cannot work. 

• Do you have savings? 

Carefully assess the amount of savings you have or other funds to cover household bills and living expenses. If your savings seem insufficient to sustain your lifestyle for an extended period, income protection insurance helps bridge that financial gap while recovering from illness or injury.

• Do you have existing debt obligations? 

Do you have regular debt payments such as mortgage, utility bills, or other loans? If so, income protection insurance can help ensure you meet these financial obligations without risking default or financial hardship. 

• What is your personal risk tolerance? 

Do you have an understanding of your capacity to manage financial uncertainty and income loss? Income protection insurance provides a safety net, allowing you to focus on recovery without the added burden of financial worries. 

Alongside asking yourself these questions, it is important to create a personalised budget to gain a clearer picture of your monthly expenses and the income you might need to replace if you can’t work. This will help you determine the appropriate level of coverage you might need. 

Which Premium Type is Right for me? 

When choosing a premium type for income protection insurance, you will likely have the choice of stepped or level premiums. The choice you make will impact how much you pay now and in the future. 

Stepped Premiums

These are recalculated at each policy renewal, and it is likely that at each renewal your costs will increase as you age and become more prone to illnesses. However, they are generally cheaper in the early years of the policy. 

Level Premiums

These are not based on the policyholder’s age. They charge a higher premium at the start of the policy, but the cost changes over time and increases are not based on age. 

The choice on which type of premium to choose is completely up to you. Morgan Insurance Brokers will help provide you general advice on making this decision but it is up to you to evaluate your personal and financial needs in deciding what’s best for you. 

Why Choose Morgan Insurance Brokers? 

At Morgan Insurance Brokers, we’ve recently added income protection insurance to our range of services because we know exactly how crucial it is to safeguard your financial future during rainy days. 

Our team is committed to securing the ideal coverage for you at the best price and customised to meet your individual needs. With access to over 150 insurers, our skilled brokers will guide you through your options and help you make well-informed decisions.

by Mojo Dojo

What is Excluded from Income Protection Insurance?

Income Protection Insurance in Australia acts as a financial buffer, offering a replacement income stream for individuals who are unable to work due to illness or injury. Instead of directly replacing lost income, it provides a monthly benefit, typically up to 70% of the insured person’s pre-tax income. This benefit is designed to cover a range of financial commitments, including daily living expenses, medical and rehabilitation costs, mortgage or loan repayments, and even insurance premiums. 

This safety net ensures that individuals can prioritise their recovery without the added burden of financial strain. It provides a sense of security, allowing individuals to focus on regaining their health while maintaining their financial stability and meeting their financial obligations. Like most insurance coverages, it acts as a personal rainy day safety net. 

What does it Include? 

Each income protection policy has a definition of partial or total disability that must be met before a claim can be made, and it is important to check with your insurer for their specific definitions. 

Some of the most common things that income protection insurance cover includes: 

• Injuries or illnesses that prevent you from working, as long as they are not listed as a specific exclusion in your policy.
• A percentage of your regular income while you are unable to work, allowing you to cover your living expenses. 

Additionally, many policies offer coverage for rehabilitation services and ongoing medical treatments, providing a more inclusive safety net during your recovery period.

What is Excluded? 

While income protection insurance acts as an essential safety net for individuals in cases of injury, and illnesses it does not cover everything. It’s important to note that just like most insurance policies, income protection insurance has its own list of exclusions too. 

Here’s a list of the most common exclusions: 

Pre-existing medical conditions 

Many income protection plans have limitations or exclusions related to pre-existing medical conditions. It’s essential to disclose any pre-existing conditions when applying for coverage, as failure to do so could result in a claim being denied. 

Self-inflicted injuries 

Injuries that are intentionally self-inflicted are excluded to prevent individuals from taking advantage of their coverage. However, with specific providers, if an injury results from a mental condition, it might still be covered. 

Acts of war and terrorism 

Injuries or illnesses resulting from war are often excluded due to being too unpredictable and are broad in scope for standard insurance coverage. 

Criminal activities 

Participation in illegal activities typically will lead to exclusion from coverage for any resulting injuries or illnesses. 

Risky activities 

Income protection policies may exclude coverage for injuries or illnesses sustained while participating in activities deemed risky. However, what is specifically classified as ‘risky’ will vary between insurance providers. 

Unemployment 

Situations related to job loss such as seasonal, self-administered, or the end of a fixed-term contract unemployment are typically not covered. 

Voluntary elective surgery or treatment 

Some insurance policies exclude or limit coverage for elective surgeries and treatments that are not considered medical emergencies. 

It’s crucial to thoroughly review the terms and conditions of any income protection policy to understand the specific exclusions and limitations. Seeking advice from insurance brokers can be helpful in understanding these details and selecting the most appropriate coverage for you. 

Why Choose Morgan Insurance Brokers? 

At Morgan Insurance Brokers, our team brings extensive experience, knowledge, and expertise to the insurance industry.

Navigating the complexities of income protection insurance can be challenging, especially when seeking comprehensive coverage from a reliable source. That’s why we are dedicated to finding the best coverage at the right price tailored to your specific needs. By working with over 150 insurers, our experienced brokers ensure that you have a clear understanding of your options, enabling you to make informed decisions.

We have recently expanded our services to include income protection insurance because we recognize the critical importance of protecting your income during challenging times. This coverage helps ensure you can meet your rent or mortgage payments, manage daily expenses, and avoid relying on friends, family, or other external support.

by Mojo Dojo

What does Income Protection Insurance Cover?

Within Australia, Income Protection Insurance is a financial safety net designed to replace a portion of an insured individual’s income if they become unable to work due to illness or injury. Income protection insurance provides regular monthly payments, typically replacing up to 70% of the insured person’s pre-tax income. 

These payments help cover essential living expenses, ensuring financial security and stability during the recovery period. As an individual with income protection insurance, in the event of an unfortunate event, you can still maintain your financial obligations whilst focusing on recovery without the added stress of lost income. 

How does Income Protection Insurance Work? 

With an income protection insurance policy in place, you can help ensure that you and your loved ones will not be left with a major financial burden if you were to lose your income. The benefit payment can be used for various daily, monthly, and unexpected expenses including: 

• Rent and mortgage payments
• Ongoing bills and everyday miscellaneous expenses
• Medical and rehabilitation costs 
• Transportation costs 
• The insurance premium itself 

To understand how income protection insurance works, it’s important to know the key aspects of its operations. 

Waiting Period 

When you first purchase an income protection insurance policy, you have the option to choose a waiting period. This period represents the time you need to wait after becoming unable to work due illness or injury before your insurance benefits begin.

The waiting periods usually range from 30 days to two years, with shorter periods generally leading to higher premium costs. You can choose to  tailor this to your financial capacity and savings, allowing you to manage expenses until the insurance payment commences. 

Benefit Period 

This refers to the duration for which the insurance will continue paying out benefits while you are unable to work. This can vary significantly depending on your chosen policy. Choosing an appropriate benefit period requires considering career longevity and potential health risks to ensure continuous financial coverage.

Claims & Payouts 

If you experience an illness or an injury that prevents you from working, you would typically file a claim with your insurance provider. Once the waiting period you selected elapses, and your claim is approved, you will begin receiving monthly payments, typically up to 70% of your pre-tax income. These payments can be used to cover various financial obligations. 

In essence, it operates as a financial safety net, providing you with income during times you are unable to earn due to health reasons. 

What Specific Expenses are Covered? 

Income protection insurance not only helps individuals cover the commitments listed below but also enables them to maintain their overall financial health by supporting their ability to save and invest during periods of income loss. 

Day-to-day living expenses

This would include everyday costs of living, such as groceries, utilities, and transportation.

Medical and rehabilitation expenses

These costs can quickly add up and include doctor’s appointments, treatments, and therapies.

Mortgage and other debt repayments 

Income protection benefits can help to prevent falling behind on loans for a house or car, as well as credit card payments. 

Insurance premiums 

This ensures the continuation of coverage from the policy during the benefit period.

This support is designed in such a way that it empowers individuals to focus on their recovery without the added stress of financial burdens. 

What does it Not Cover? 

Here’s a list of what income protection insurance does not cover: 

• Some pre-existing medical conditions 
• Injuries caused by self-harm 
• War and terrorist activities 
• Illegal activities 
• High-risk behaviours 
• Job loss 

Always remember to thoroughly read and understand exactly what your policy stipulates before making a decision to purchase. Our brokers can help you navigate the complexities involved to make the most informed choice and secure coverage that best policy that meets your needs. 

Why Choose Morgan Insurance Brokers? 

At Morgan Insurance Brokers, we are a team of professionals with a wealth of experience, knowledge, and skill in the field of insurance. 

As someone seeking income protection insurance, we understand how it might be complex to get all the coverage you need from a single, trusted source. Hence, we make it our mission to find the best coverage at the right price for your specific requirements. Our team of experienced brokers work with over 150 insurers, ensuring that you understand your options and can make an informed decision. 

We recently expanded to include income protection insurance as part of our service offerings. We recognise the importance of safeguarding your income in times of hardship so that you can keep up with your rent or mortgage payments, daily expenses, as well as not rely on friends, family, or other third parties for financial support. 

by Mojo Dojo