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.