What Factors Affect the Cost of Income Protection Insurance?
Let’s not beat around the bush–income protection insurance is not cheap. Nonetheless, there’s a good reason for that. You’re insuring your most valuable asset: your ability to earn an income.
That being said, not everyone pays the same rate. Two individuals earning the same salary might have very different premiums, and it often leaves most people wondering, “why is mine so high?” or “what’s actually driving the cost of my policy?”
So, here’s a proper breakdown of the key factors that influence the cost of your income protection insurance–the factors that insurers actually care about, and what you can (and can’t) control.
Your Job
This is probably the most important factor.
Insurers look closely at what you do for a living, because that tends to directly impact how likely you are to get injured or sick and how long you might be off the tools.
So, if you’re a tradie on-site every day, climbing ladders or handling heavy equipment, you’re bound to be rated as higher risk compared to, say, a marketing consultant sitting at a desk all day. It doesn’t matter how fit or experienced you are, it’s all about statistical risk.
Generally speaking, jobs fall into risk categories, and that changes your premium. The more physical or high-risk your work, the more you’ll pay in monthly premiums. Regardless, don’t let that put you off, income protection is even more essential if you do work in a risky role.
Your Age
No surprise here. The older you get, the higher your premiums.
Why? Because your risk of illness and injury increases with age. Insurers know that recovery can take longer, and the chance of something serious popping up (i.e. back issues or chronic illness) goes up as you get older.
That said, most of the time, if you lock in a policy while you’re younger and healthier, you can often hold onto the lower premium for the life of the policy. So, the earlier you sort it out, the better.
Your Health and Medical History
This one’s significant, and it can get complicated.
When you apply for cover, insurers will almost always ask about your health history. That includes any pre-existing medical conditions, past surgeries, mental health history, and lifestyle habits. If there’s anything in your medical background that raises a red flag, insurers might:
- Increase your premium value.
- Add exclusions to the policy.
- Or in some cases, decline cover altogether.
While it’s not always a dealbreaker, it will affect the cost of your policy. This is why being upfront during the application process is key. A good broker will help you navigate this without tanking your chances of getting covered.
Smoking and Lifestyle Habits
If you’re a smoker, you can expect to pay more–a whole lot more.
Smokers pay significantly higher premiums than non-smokers. Why? Well, because statistically, smoking increases the risk of just about everything, from heart disease to cancer and respiratory issues.
Other lifestyle factors such as heavy alcohol consumption or high-risk hobbies (i.e. skydiving, motorsports, mountaineering) can also affect your premiums or attract exclusions. Once again, it all comes down to risk. If you’re engaging in lifestyle habits or hobbies that make you more likely to get injured or ill, you’ll pay for it in the policy.
How Much You Want to Be Paid (Benefit Amount)
This one’s straightforward. The more of your lost income you want replaced, the higher your premium.
Most policies will cover up to 70% of your gross income plus super guarantee contributions, but you don’t have to insure the full amount. Some people choose to pay a lower benefit if they’ve got other savings, a partner’s income, or just want to keep premiums down. However, it’s important to remember not to short-change yourself when you’re off work and counting every dollar.
Waiting Period
This is the amount of time you’ll need to wait after making a claim before payments start coming through. Common waiting periods are 30, 60, or 90 days. The shorter the wait, the higher the cost. This is because you’re asking the insurer to step in sooner to process your claim. If you can afford to wait a little longer, maybe you’ve got enough sick or annual leave and some savings, you can bring the cost of the premium down.
Benefit Period
This refers to how long the policy will pay you if you’re off work long-term.
Options typically range from two years and usually up to age 65. The longer the benefit period, the more you’ll pay–but that also comes with more protection. If your injury or illness drags on, that longer cover can be the difference between financial stress and peace of mind.
Again, think about your job. If you’re in a role where recovery might take a while, or you’re your household’s main source of income, longer cover is worth considering.
Policy Type and Add-Ons
All income protection policies are indemnity (based on your income at the time of claim). Agreed value policies used to be more expensive and have been phased out unless you already have an existing older policy. Add-ons like indexation (where your benefit increases with inflation), will also raise the premium.
Need Help With Insurance? We’ve Got You
At the end of the day, income protection isn’t about finding the cheapest policy–it’s about finding the right policy.
There are plenty of moving parts that affect the cost, but with the right advice and a broker who listens to your needs, you can structure a policy that’s both affordable and tailored to your needs.
At Morgan Insurance Brokers, that’s exactly what we do. Whether you’re just starting out, self-employed, or looking to review an old policy, we’ll help you get the protection you need–without paying more than you need to.
Contact us today for more information on how we can help you.
The Top 5 Common Misconceptions About Income Protection Insurance
Income protection insurance, you’ve probably heard of it, maybe even considered it, but chances are, it’s still sitting in the “I’ll look into that later” pile. And honestly? That’s understandable. It’s one of those things people often don’t prioritise until life throws a curveball.
But the thing is, a lot of the hesitation around income protection stems from common myths, the kind that get passed around in casual conversations or buried in Reddit threads.
Hence, let’s unpack five of the biggest misconceptions holding people back from getting the cover they might actually need.
Misconception #1: It Only Covers Serious Accidents
One of the most persistent myths is that income protection is just for freak accidents, i.e. car crashes, falling off a roof, major trauma. And while it does cover serious accidents, it's important to note that– that’s just a slice of the picture.
What many don’t realise is that most income protection claims are actually due to illness such as cancer, chronic fatigue, back pain, long-term Covid complications, and even stress and burnout. If you’re too unwell to work (mentally or physically) and you meet the policy’s conditions, income protection steps in.
Misconception #2: It’s Too Expensive for What You Get
Lots of people assume income protection is only for high earners. But here's the thing: the pricing is actually quite flexible, and policies can be tailored to your budget.
The key factors that affect your premium? Age, occupation, smoking status, waiting period, and benefit duration. Want to lower your premium? Opt for a longer waiting period or a shorter benefit period.
And when you stack it up against losing your income for months (or longer), the value becomes pretty obvious. Even a modest payout, say 70% of your income, can help cover rent, groceries, school fees, or mortgage repayments when you’re off work.
Also worth noting? Income protection premiums are often tax-deductible, depending on how the policy is structured. That alone can make the cost much more manageable.
Misconception #3: Workers’ Compensation or Sick Leave is Enough
We get it, it’s easy to assume that your employer or the government has you covered. And to some extent, they do. But it’s rarely enough to cover long-term leave.
Workers’ compensation only kicks in if your injury or illness is directly related to your job, and even then, it can be limited. Sick leave, meanwhile, is often capped at a few weeks. It’s great for short-term recovery, but what if you're unable to work for longer?
Income protection fills that gap. It’s not about replacing what you already have, it’s about complementing it.
Misconception #4: It Won’t Cover Mental Health Conditions
Mental health issues are one of the leading causes of workplace absence in Australia, and many insurers have responded by expanding their cover accordingly.
Today, most modern income protection policies do include mental health, provided it’s diagnosed and documented by a professional. That said, not all policies are created equal, and some may include mental health exclusions or stricter waiting periods.
What’s important here is clarity. If mental health cover matters to you (and honestly, it should), check the fine print or speak to an insurance broker. Better yet, disclose any relevant history upfront, that way, you know exactly what you’re covered for.
Misconception #5: “I Don’t Need It, I’m Young & Healthy”
When you’re young, you’re statistically less likely to claim, which means your premiums are lower and your cover options are wider. You’re also more likely to be approved without exclusions or loadings (higher costs) for pre-existing conditions.
Income protection is like an umbrella. The time to get one isn’t when it’s already raining. It’s while the sun’s still out.
Get Insured Today– Before Life Happens
No one likes to think about being unable to work. But for many Australians, it often happens unexpectedly. And when it does, it’s good to have income protection insurance. It’s essentially the difference between financial freefall and stability.
So, if you’ve been putting it off, maybe because of one of the myths above, now is a good time to rethink things. Talk to an expert, ask the right questions, and most importantly, read the fine print.
If you need assistance obtaining income protection insurance or have questions about the details, contact us to speak with one of our experienced brokers.
How Much Income Protection Insurance Do You Really Need?
Here’s the truth: there’s no neat, one-size-fits-all number when it comes to income protection insurance–and any broker that tells you otherwise is probably more interested in a quick policy sale than actually protecting your livelihood.
So, let’s break it down properly.
First, What is Income Protection Actually For?
Income protection insurance steps in when you can’t. It’s specifically designed to replace a portion of your income if you’re unable to work due to illness or injury, up to 70% of your regular pay. It’s not designed to make you rich, but what it does do is give you breathing room–enough to keep the lights on, the rent/mortgage paid, and food on the table while you prioritise getting back on your feet.
But how much do you really need? That’s where it gets personal.
Start With Your Monthly Essentials
This is exactly where most people underestimate things. Income protection isn’t just about covering your lost salary, it’s about helping you manage your basic needs, such as:
- Rent or mortgage payments
- Groceries
- Utility bills
- Petrol or public transport
- Phone and internet bills
- Kid’s school fees (if that applies to you)
- Debt repayments (credit cards, loans, etc).
Now, add a bit of buffer room. You might be spending more at home if you’re recovering, i.e. extra heating, takeaway meals, medical appointments. Likewise, don’t forget to take into account private health insurance premiums if you’re paying them out of pocket.
Tally that all up. The sum is the bare minimum you need your income protection policy to cover each month.
Now Consider Your Lifestyle
Not everything you budget for is essential, but it still matters. Most people don’t want to downgrade their lifestyle while recovering, and frankly that’s fair enough. You’re already off work, dealing with doctors, and stuck at home. You don’t want to also cancel your monthly subscriptions, give up your streaming services, or feel like you’re losing more than you already have.
We’re not suggesting that you be able to cover every last luxury,but aim for enough coverage that you can maintain a sense of normalcy in your life. If the ultimate goal is to recover and return to work, keeping some semblance of your usual life makes that transition much easier, both mentally and emotionally.
What’s Your Current Income?
Income protection is usually capped at a percentage of your pre-tax income, oftentimes at 70% or less. Some policies might offer more, particularly if they include super contributions.
For instance, if you’re earning $6000 per month before tax, your monthly benefit might max out at $4200. That’s what you’ve got to work with. Now compare that against your monthly expenses and lifestyle costs? Is it enough?
If not, you might want to look at additional policies, trauma insurance, or even consider topping up with savings or a rainy-day fund.
Consider the Waiting Period
The waiting period is how long you’ll need to wait before your policy starts paying out. Common waiting periods tend to be 30, 60, or 90 days long.
The longer the wait, the cheaper the premium. But the real question is: how long can you realistically go for without an income?
If you’ve got a decent amount of sick or annual leave built up, you might be able to get away with a longer waiting period, but if you’re self-employed, casual, or don’t have that safety net, you’ll want a shorter waiting period, even if it might cost more.
How Long Should It Pay Out For?
This represents your benefit period. Some policies pay out for a maximum of two years, while others may cover you till you’re 65. The longer the benefit period, the higher the premium, but again, it depends on your job, health, and financial plan.
For instance, if you’re in a trade or physically demanding role, and an injury could take you out long-term, a two-year policy probably won’t cut it. Likewise, if you’re still early in your career and building up assets, you might want the reassurance of longer cover.
Don’t Just Pick a Policy and Forget It
Your income protection needs aren’t static. Got a pay rise? Had a kid? Maybe you bought a house? Your policy should change with your life. A lot of people set up their income protections when they first get a job, and then never look at it again.
You should at least be reviewing your cover every couple of years, or any time there’s a major life change. Otherwise, you might find yourself uninsured just when you need it most.
So, How Much Do You Really Need?
At the very least, enough to cover your core monthly expenses–rent, mortgage, food, utilities, and/or debt repayments. That’s a non-negotiable. From there on, it depends on how much of your lifestyle you want to protect and how long you could survive for without a stable/regular income.
The good news? You don’t have to figure this out all alone.
At Morgan Insurance Brokers, we’ve helped tradies, business owners, freelancers, and families all across Australia get the right income protection insurance policy for their needs. We’ll work closely with you to tailor a policy that’s grounded in your real-life numbers, not just what some insurers form says you might need.
Whether you’re just starting out or reassessing after years on the same policy, we’ll help match you with the right cover, one that helps you maintain as much normalcy as possible when life throws you a curveball.
Contact us today for more information on how we can help you.
Can Income Protection Insurance Be Used for Mental Health Conditions?
If you’ve ever needed time off work for anxiety, depression, burnout or another psychological condition, you’ll know the impact it can have, not just on your wellbeing, but on your income. It’s a growing concern too. More Australians are taking leave due to mental health issues than ever before, and for some, that’s where income protection insurance steps in.
But can it actually cover time off due to mental illness? The short answer is yes, though it depends on your policy, the severity of your condition, and how your insurer assesses your claim. It’s not always straightforward, but it’s worth understanding your options.
For more information on income protection insurance, read this.
Types of Mental Health Conditions Commonly Covered
According to a National Study of Mental Health and Wellbeing, approximately 42.9% of Australians aged 16-85 have experienced a mental disorder at some point in their lives. In fact, mental health conditions have emerged as the leading cause of income protection and total and permanent disability (TPD) claims for several years.
This alone underscores the significant impact of mental health conditions on the Australian workforce and the importance of income protection insurance in providing financial support during periods when individuals are unable to work due to mental health issues.
While income protection insurance is typically associated with physical injuries or illnesses, most comprehensive policies also cover a range of mental health conditions. This typically includes:
- Depression, one of the most common claims, especially when severe and diagnosed by a medical professional.
- Anxiety disorders, generalised anxiety, panic disorders, and social anxiety may be covered if symptoms significantly impair your ability to work.
- Post-Traumatic Stress Disorder (PTSD), often linked to trauma, including workplace incidents, and must be diagnosed by a psychiatrist or psychologist.
- Bipolar disorder, this tends to involve stricter conditions and more frequent reviews, but is often eligible under long-term claims.
- Adjustment disorder and burnout, while harder to prove, these are increasingly recognised as valid causes for extended sick leave.
Not every policy covers all of the above, and some may include mental health exclusions unless disclosed during the application. The key is transparency: if you’re upfront with your medical history when applying, you’re more likely to be covered down the line.
Policy Terms to Be Aware of
This is where things get a bit nuanced. Just because a policy can cover mental health doesn’t mean it will, or that it will do so without a few caveats. Here are a few things to watch for:
- Exclusions, some insurers still include general exclusions for mental health conditions. Others might exclude pre-existing conditions, especially if you’ve had treatment within a certain timeframe before taking out the policy.
- Waiting periods, most policies have a waiting period. This means you won’t receive payments immediately after taking leave, you’ll need to be off work for the entire waiting period first.
- Benefit periods, depending on your policy, you might be entitled to income support for two years, five years, or until a certain age. Long-term claims for mental health can be reviewed more rigorously than physical ones.
- Partial disability claims, if you can return to work in a reduced capacity, say, part-time or in a different role, you may be eligible for partial benefits, depending on your policy’s structure.
- Medical evidence, mental health claims almost always require supporting evidence from specialists. Regular GP notes may not be enough.
3 Steps to Claiming Income Protection Insurance for Mental Health Conditions
So how does one actually go about making a claim?
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- First, before approaching your insurer, consider speaking to your GP or a mental health professional first. It’s mandatory to have an official diagnosis and clear recommendation that you’re unfit to safely perform your job duties. This documentation then becomes the foundation of your claim.
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- Next, notify your insurance provider that you now intend to file a claim. They’ll provide you with a form that will outline what’s needed, typically including:
- The initial GP report
- A certified copy of your identification
- The policy schedule
- All standard claim forms and other relevant documentation or reports.
- Next, notify your insurance provider that you now intend to file a claim. They’ll provide you with a form that will outline what’s needed, typically including:
- Last but not least is the assessment and decision process. This can take some time as the insurance company will meticulously assess your claim based on the severity of your condition. IF approved, you’ll then begin receiving payments (after the waiting period ends) to help cover your income while you recover.
Pro Tip: Keep detailed records, everything from appointment notes to communications with your insurer. It’ll make a huge difference if a dispute arises.
Choosing the Right Policy
It’s definitely tempting to omit certain parts of your mental health history to secure lower premiums. But remember, this can backfire if and when you need to make a claim. A good insurance broker can help you find cover that doesn't penalise you for being upfront.
Get in touch today to find out how we can support you.
How Income Protection Insurance Can Help You Maintain Your Income While Recovering
Income protection insurance is the financial lifeline you don’t realise you need until the unexpected happens.
It’s a common misconception that income protection insurance is only for the wealthy. In reality, the opposite is true. If you rely on your income to cover mortgage repayments, household expenses, and daily living costs, have you considered how you’d manage financially if that income suddenly stopped?
Whether it's due to illness or injury, income protection insurance helps ensure you can keep up with your financial commitments while you focus on recovery.
At Morgan Insurance Brokers, our experienced team of brokers can help you find the right cover to suit your needs. Reach out today to protect your income and your peace of mind.
The Basics of Income Protection Insurance
Whether you have income protection insurance through your super, an employer, or private insurer, it’s important to understand exactly how the coverage works. Key considerations include:
Waiting Period
The waiting period for the insurance claim represents the minimum amount of time you need to be unable to work before you can begin receiving benefit payments. In most cases, this ranges from two weeks to three months.
With some policies, you may be able to customise your waiting period. Generally, the longer the waiting period, the more affordable the policy. When deciding on a waiting period, it’s important to consider how much sick leave, annual leave, and emergency savings you currently have available.
Benefit Period
The benefit period refers to how long the monthly payments will continue if you remain unable to work due to illness or injury. Most income protection policies offer benefit periods ranging up to five years or to a specific age.
It is important to note that while a longer benefit period typically results in a more expensive policy, it also provides a longer and greater level of protection during your time away from work.
Type of Premiums
The type of premiums you choose, whether stepped or level also impacts the cost of your policy. Stepped premiums are generally recalculated at each renewal, meaning the cost may increase as you age due to a higher likelihood of claiming.
In contrast, level premiums are typically more expensive at the start of your policy. However, the cost does not increase based on your age, so premium rises tend to happen more slowly over time.
Payout Amount
In Australia, most income protection insurance policies offer up to 75% of pre-tax income. Some may also include an additional 10–15% to cover superannuation contributions.
Maximum monthly payments vary by provider, with some specialised policies offering up to $30,000 per month.
Benefits of Income Protection Insurance While Recovering
Designed to replace a portion of your income, income protection insurance ensures you continue receiving a steady monthly payment to support your lifestyle while recovering from an injury or illness. Key benefits of income protection insurance include:
A continuous stream of income even if you can’t work
While you may have savings, a prolonged period of not being able to work can quickly deplete them. During such times, income protection insurance provides you with adequate financial support, helping you manage ongoing expenses without having to exhaust your existing savings.
Income protection protection insurance can be customised
Depending on your provider, your policy can be tailored to suit your individual needs and preferences. This includes adjusting elements such as the waiting period, benefit period, and premium structure. For example, you could choose a longer benefit period with lower monthly premiums, or opt for a shorter waiting period with higher premiums.
Income protection insurance may be tax deductible
In many cases, the premiums you pay for income protection insurance are tax-deductible, making it a more cost-effective option. This generally applies when the policy is held outside of your superannuation. It is important to confirm your eligibility with the ATO or a qualified tax professional. Alternatively, by working with a broker, you can receive tailored advice to help guide your decision.
Get Income Protection Insurance While You're Young
A core component of any financial plan, income protection insurance helps safeguard you if the worst were to happen. The team of brokers at Morgan Insurance Brokers can guide you in securing the best policy for your needs, offering much needed peace of mind during challenging times.
If you need help obtaining income protection insurance or are unsure about specific details, contact us to speak with one of our experienced brokers.
What Does Income Protection Insurance Cover and How Does It Work?
Have you ever thought about what might happen to you or your dependents if you were suddenly unable to work? How would you afford monthly bills, mortgage payments, and other miscellaneous expenses that support your livelihood?
If this feels like a stressor for you, it might be time to start considering income protection insurance, especially if you work within a high-risk occupation.
It’s important to find out how it works, when you need it, and the factors you need to consider when buying it.
What Income Protection Insurance Covers
In essence, income protection insurance is designed to replace a portion of your income if you’re unable to work due to an unexpected illness or injury. Income protection insurance then provides monthly payments (for a specified period of time), typically up to 70% of your pre-taxable income to help you meet expenses while you recover.
However, it’s important to be mindful that each income protection insurance policy is subject to your provider’s specified terms and conditions. Moreover, keep in mind that the higher the cover, the more you’ll end up paying in monthly premiums. This makes it critical that you calculate exactly how much coverage you’ll need in the foreseeable future in the event of the worst happening.
For instance, if your monthly income is $15,000 but you only require less than half of that to live comfortably for a period of time, then the amount you’ll pay in premiums will be much lower. This allows you to better manage your present monthly expense while accounting for the additional but necessary cost of income protection insurance.
Key aspects of income protection insurance typically include:
- Monthly benefit payments, designed to replace a specified amount of your lost income.
- Benefit period, which varies depending on the policy you undertake. Typically, the maximum length you receive payments for can be anywhere from one year up till a specific age, like 65.
- Waiting period, which represents the minimum amount of time you need to wait after being unable to work to start receiving benefit payments.
- Partial disability benefits (only offered by some insurers) for those who are still able to work part-time but at a reduced capacity.
- Return to work support (only offered by some insurers) such as rehabilitation or vocational training.
- Offsetting clauses that may reduce the benefit you receive if you receive income from other sources (workers’ compensation, other income protection policies, etc) during the specified benefit period.
- Superannuation contributions, in which some policies may include a component that replaces the superannuation contributions you would have made if you were able to work full-time.
- Choice of benefit period, wherein you can decide how long you would like to receive benefit payments for.
Each income protection policy has its own definition of partial or total disability that must be met before a claim can be made. We understand that the options available to you are wide and varied.
If you find this overwhelming, don’t hesitate to contact us for more information. As experienced brokers, we’ll guide you in partnering with the right provider to suit your exact needs.
Do You Need Income Protection Insurance?
This very much depends on your individual circumstances and current financial situation.
Here are several questions you can ask yourself when deciding whether income protection insurance is right for you.
- Do I have savings or other financial safety nets to cover my expenses?
- What are my monthly living costs (e.g. rent/mortgage, utilities, groceries, debts)?
- Do I have dependents who rely on my income?
- Is this a short-term safety net, or do I need long-term coverage?
- Is my job considered high-risk or physically demanding?
- Does my employer provide any income protection or disability cover?
If you are still unsure, seek advice from a qualified professional who can help you determine the right level of coverage and policy options for your needs.
Get Insured Today– Before Life Happens
A critical but often overlooked component of any financial plan, income protection insurance is a smart investment, especially while you’re still young. With lower monthly premiums, you’ll be able to safeguard your financial future if the worst were to happen.
The team at Morgan Insurance Brokers can help you secure the best income protection policy for your needs, providing valuable peace of mind, even during the most challenging circumstances. We’ll help you compare different policies from various providers to find the best option for your needs and budget.
If you need assistance obtaining income protection insurance or have questions about the details, contact us to speak with one of our experienced brokers.
How Income Protection Insurance Can Safeguard Your Lifestyle During Illness or Injury
Research commissioned by TAL in 2019 indicates that only approximately half of all Australians have some form of life insurance policy, with many remaining under-insured. As per the ATO, while the number of active life insurance policies is twice the number of working-aged Australians, this does not signify that most Australians have adequate insurance coverage. In fact, despite the significance of active policies, only about 52% of Australians hold some form of life insurance.
If you are considering the importance of income protection insurance, consider this scenario: You unexpectedly injure your back and require time to recover. Without income protection insurance, you are left without a paycheck during your recovery. Bills begin to pile up, and your savings rapidly deplete. Suddenly, you are juggling both health and financial stress. Income protection could have helped maintain financial stability while you focused on recuperating.
What Does Income Protection Insurance Cover?
Sometimes called a salary continuance insurance, income protection insurance is designed to provide you with a stream of continuance income if you can’t work for an extended period of time due an unexpected illness or injury.
Income protection insurance commonly provides a monthly benefit, a predetermined percentage of your pre-tax income, to assist with essential living costs while you recover. Depending on the specific policy, income protection policies can offer up to 70% of your pre-tax income during your claim.
Each policy has its own definition of partial or total disability that must be met before a claim can be submitted. It is important to review your insurer's website or product disclosure statement (PDS) before committing to an income protection policy to guarantee that you obtain the desired coverage. Do not hesitate to consult with an insurance broker to explore the available options before making an investment.
What Is Excluded from Income Protection Insurance?
Depending on the type of policy you undertake, exclusions vary. However, some common exclusions include:
- Self-inflicted injuries
- Attempted suicide
- Drug usage
- Participation in illegal activities
- Pregnancy
However, these exclusions differ among providers. Some policies may have a narrower definition of exclusions, while others may be more extensive. It is always important to review the complete details of your policy before making an investment or filing a claim.
Contemplating if You Need Income Protection Insurance?
If you are self-employed, have dependents, or have debt, investing in an income protection insurance policy is a prudent choice.
Your insurer will typically require details such as your age, occupation, current income, medical history, lifestyle habits, and participation in high-risk hobbies to determine (a) their willingness to insure you, (b) the cost of your premiums, and (c) specific terms and conditions attached to your policy.
Generally, an indemnity policy will apply for new contracts after November 2021 as follows:
- An indemnity value policy, which insures you for a percentage of your salary at the time you make a claim. If your salary has decreased when you make the claim, you will receive a smaller monthly insurance payout.
Additionally, there is the option of choosing between stepped or level premiums.
- Stepped premiums are calculated based on your age. The cost of coverage is lower if you sign up when you are younger and increases as you age.
- Level premiums tend to be higher at the beginning of the policy, but changes to the cost are not based on your age, so changes are less significant over time.
It is important to consider your options carefully before making a decision. Making an incorrect decision or providing misleading information can impact your coverage.
Injured or Unwell? Income Protection Keeps You Covered
If unforeseen circumstances necessitate financial protection, regular benefit payments can alleviate some of the burden during your recovery. Additional benefits and considerations for investing in an income protection insurance policy include:
- Most policies offer a rehabilitation benefit (outside of super), collaborating with your medical practitioner to ensure you receive the optimal treatment.
- Most policies offer a recurrent disability benefit, eliminating the need for subsequent waiting periods.
- Some policies offer a death benefit, payable to your beneficiary in the event of your untimely demise while your policy remains active.
- Tax deductibility, enabling you to claim them during your tax return period.
Should you require dependable income protection insurance, consider collaborating with one of our specialist brokers at Morgan Insurance Brokers to select a plan tailored to your requirements.
Be prepared for unforeseen events. Contact us today.
Benefits of Income Protection Insurance for Self-Employed Individuals
As a self-employed individual, you make up your entire business. You are the source of your livelihood. But have you ever wondered what would happen if you were to suddenly fall ill or get injured, impacting your ability to work? What would happen to your income? Or worse, your lifelihood?
Well, that’s where income protection insurance policies come into play. They’re designed to replace up to 70% of your pre-tax income during periods you’re unable to work, enabling you to prioritize your rehabilitation.
In contrast to salaried employees who have access to a range of worker's compensation benefits, investing in income protection insurance is the optimal method for self-employed individuals like yourself to safeguard your financial stability.
What are Your Options for Income Protection Insurance?
The good news is, as a sole trader income protection insurance is available to you. However, there are a few criteria that need to be met and key factors that need to be considered before obtaining income protection coverage.
- Regarding eligibility requirements, certain conditions may apply, such as a minimum period of self-employment and/or a minimum number of weekly working hours to be classified as self-employed for an income protection policy.
- Most policies offer coverage for up to 70% of pre-tax income plus super guarantee for a specified period. It is crucial to note that income protection insurance solely covers the loss of personal income, not the income of the business.
- The insurer may require proof of earnings through tax returns or bank statements. If income varies, the average may be calculated instead.
- Currently all new income protection policies are offered as indemnity value policies. Therefore, income is calculated when the claim is made, not when the policy is initiated.
- The benefit period is variable and can range from a year, to a couple of years, or even to age 65 years for qualifying occupations.
- Waiting periods can range between 30 days to 2-years. It is important to ensure adequate savings are available to cover expenses while waiting for benefit payments to commence.
- Generally, premiums are tax-deductible; however, benefit payments are considered taxable income.
- Occupation, age, medical history, and lifestyle habits determine the cost of premiums.
- Most policies offer optional benefits, including rehabilitation benefits (outside super).
It is crucial to review and evaluate different income protection insurance policies before making a decision. Be sure to understand your product disclosure statement (PDS) or consult with an insurance broker to determine what’s available to you and to decide the best policy for your personal circumstances.
What are the Benefits of Income Protection Insurance for the Self-Employed?
There are several potential benefits associated with investing in income protection insurance for self-employed individuals who lack access to traditional employee benefits. Core benefits include:
- Peace of mind knowing that you have a financial safety net. You’ll be able to focus on your recovery without the added worry of financial difficulties.
- Coverage of everyday expenses as benefit payments can be used to pay for bills, groceries, mortgage payments, and even business-related expenses.
- Flexibility, with some policies being able to be tailored to your specific needs, such as the waiting period and benefits. For instance, you can opt for a longer waiting period if you have savings that can hold you afloat for a while.
- No medical tests, meaning you can apply for an income protection insurance policy without needing medical or blood tests.
- Broad coverage for a range of illnesses and injuries, including both physical and psychological conditions.
Like every other insurance policy out there, it’s something you have in the back of your mind but may not invest in, until it’s too late or impossible to do so. Weigh up these benefits and consider how important it is for you to be well protected when the unexpected comes your way.
Get the Help of an Experienced Insurance Broker
At Morgan Insurance Brokers, we simplify the process of acquiring your next insurance policy. We understand the critical importance for self-employed individuals to have peace of mind and comprehensive coverage in adverse situations. Our team of brokers can assist you in evaluating your options and determining the optimal course of action.
It’s always better to be safe than sorry. Contact us today.
Income Protection Insurance vs. Life Insurance: What's the Difference?
In essence, income protection insurance provides you with monthly, ongoing benefits for the duration outlined by your policy's waiting and benefit periods. In contrast, life insurance pays your beneficiaries a lump sum benefit in the unfortunate event of your passing or a terminal illness diagnosis.
Lets Compare Income Protection Insurance and Life Insurance
First, let’s break down the intricacies of income protection insurance.
- It replaces a portion of your income, typically up to 70% due to an unforeseen illness or injury that restricts you from working. However, depending on your insurance policy, some may offer up top up coverage of your pre-tax income for the first couple of months of your benefit period.
- While income protection insurance provides regular payments while you recuperate, the benefit period can vary, from a couple of months to several years, or even a specified age.
- Benefit payments can be used to cover essential expenses such as rent, mortgage, utility bills, groceries, car loans, and more over the course of your recovery period.
- Considered beneficial for those managing debt payments, are self-employed, have dependents, or do not qualify for worker’s compensation benefits.
- Premiums are tax deductible at your marginal tax rate, as long as they are not paid through your superannuation.
- Most income protection policies may include rehabilitation support up to 12 times your monthly sum insured.
Now, let’s take a look at the workings of life insurance policies.
- It provides a lump-sum payment to your beneficiaries if you were to pass away or be diagnosed with a terminal illness.
- It is designed to offer financial protection to your loved ones in the event of your demise.
- The payout can be utilised for whatever purpose the beneficiary’s desire.
- It offers peace of mind to your loved ones knowing that they are financially protected if the worst were to happen.
- Policies may also include additional cover options such as Total and Permanent Disability (TPD) cover, critical illness, as well as child cover.
Here’s a table summarising the key differences:
| Features | Income Protection Insurance | Life insurance |
| Coverage | Loss of income due to injury or illness | In the event of your death or terminal illness |
| Payments | Regular monthly payments | A lump sum payment to a beneficiary |
| Purpose | Covers ongoing lifestyle expenses whilst you’re unable to work | Provides financial security and peace of mind to your beneficiaries |
| Benefit Period | A specified period determined when the policy is purchased | Paid out upon death or terminal illness diagnosis |
| More Benefits | May include additional benefits such as death or rehabilitation benefits | May include TPD, critical illness, and child cover |
Do You Need Both Income Protection and Life Insurance Policies?
Deciding whether you need either policy or both depends on your individual circumstances and the needs of your family and/or dependents. However, one thing to remember is that most if not all Australian superannuation policies offer insurance products as part of their packages – however this may not be an underwritten policy which may result in a more lengthy or difficult claim process. In any case, external Life insurance policies can be paid from your existing superannuation policy also.
Income protection can sometimes be purchased through your super fund, often at a reduced price. However, premiums paid via superannuation are not tax deductible in your personal name, unlike those for a policy purchased outright. Likewise, policies offered directly via your super fund provider may also have limitations. You should consider if you need additional coverage for yourself and your family.
Both types of insurance have different purposes and may not be valuable to you. To decide if income protection insurance is right for you, start by creating a budget of your needs and essential expenses. For life insurance, consider specific risks related to your health or career, particularly if you have a high-risk job. Determine if your beneficiaries, such as your children or spouse, could cover their living costs in the event of your death.
Most importantly, always remember to check your product disclosure statement (PDS) before investing in either a life or income protection insurance policy. If you require assistance, seek the help of an experienced broker to guide you through available options.
Access the Right Coverage with Morgan Insurance Brokers
Contemplating whether life or income protection insurance is suitable for you? Don’t know whether you require both or neither?
Consider reaching out to our team of experienced insurance brokers to help you decide on the best course of action. We’ll help you compare policies, ultimately helping you decide on the best insurance policy for your needs.
A small investment today can save you from a large loss. Contact us today.
The Importance of Insurance When Financing Business Assets
At present, businesses nationwide face various risks to their assets that can be mitigated with the right insurance policy. These risks can stem from losses associated with natural disasters, theft, cyber-attacks, machinery breakdowns, and more.
Having a reliable asset insurance policy can provide businesses with a vital tool to protect both their tangible and intangible possessions. Without appropriate insurance, businesses would have to bear the entire cost of replacing or repairing their assets in the event of the unexpected.
Likewise, asset insurance is a requirement for many lenders before they will provide a loan. This is to protect the loan if the borrower defaults. Therefore, it not only safeguards the business's well-being but also improves their credibility.
Types of Asset Insurance
The following are some of the most common insurance options for businesses:
- Property insurance, which covers damage or loss to buildings and other physical assets due to events like natural disasters, fire, and theft.
- Building and contents insurance is a similar type of insurance to property insurance that covers damage or loss from events including fire, storms or break-ins.
- Equipment insurance, which covers damage or loss to equipment used for business operations.
- Commercial vehicle insurance, which covers damage or loss to vehicles used for business purposes.
- Business interruption insurance, which covers lost revenue and operating expenses due to a disruption in operations caused by an unexpected event.
- Cyber liability insurance, which covers losses or damages caused by cyber-attacks and other cyber threats.
- Key person insurance, which covers loss of revenue or profits due to the death, illness, or disability of a key employee.
- Deterioration of stock insurance, which covers lost stock in cold storage after a fridge or freezer breaks down.
- Goods in transit insurance, which covers loss or damage to items during transport.
- Electronic equipment insurance, which covers electronic items from breakdown, loss or damage while at a specific location.
- Portable equipment insurance, which covers loss, damage or theft of tools and electrical equipment taken on a job.
- Burglary insurance, which covers losses, damages and associated costs from a break-in or theft.
- Farm insurance covers crops, livestock, buildings and machinery.
The selection of appropriate asset insurance for your business is crucial and necessitates careful evaluation of your specific requirements and potential risks. Although you might not need every type of insurance listed above, it's likely that you'll need a combination of several.
Steps to Choosing the Right Asset Insurance
As a business, choosing the right type of asset insurance is a critical decision. Here are some steps that will guide you towards selecting the best asset insurance policy for your business needs.
- Start by conducting a risk assessment to identify potential hazards that may affect your assets. This could include environmental risks such as fires or natural disasters and even safety risks such as thefts and cyber attacks.
- Next, determine the value of your assets. This includes physical assets as well as intangible assets, to ensure you choose an insurance plan with adequate coverage.
- Then, you should undertake comprehensive research into the range of providers and plans to find one that will meet your exact needs. It’s important to consider their experience, reputations, and financial stability so that you can be assured of their reliability on offering the right type of coverage for your business assets.
- Make sure to carefully review the terms and conditions of your policy before signing on to it. This is to ensure that it meets your specific needs, including clearly outlining exclusions, deductibles, and coverage limitations.
- Last but not least, it is advisable to seek the professional advice of insurance brokers to help in navigating the complexities involved. Brokers can provide guidance on the types of coverage that may be appropriate for your specific situation and industry.
Let Morgan Insurance Brokers Help
If your business is looking to invest in insurance to protect its assets, contact Morgan Insurance Brokers today. Our team can source the ideal insurance policy for your needs. With access to over 150 insurers and underwriting policies, we simplify the process and help you determine the best coverage for your business.
Get ready to discover the peace of mind that comes with proper asset protection.
