Accidents happen.
Each year approximately 1 million Australians are
unable to work or are hospitalised due to accident or illness*.
While sick leave might cover employees for a short period,
what happens if you have to stop working indefinitely or
have your own business?
If you earn $60,000pa at 35, by the time you retire at 65, you could have earned at least $2million – that’s a lot of lost income if you are unable to work! How would you pay the bills, the mortgage and support a family, let alone keep a business afloat? Most Australians insure their car which generally has a much lower value – so isn’t income a more valuable asset worth insuring?
Income Protection insurance can provide up to 75% of your income if you are unable to work due to accident or illness. Cover can be provided up until age 65, which can give you and your family peace of mind and ensure you are financially protected.
Generally premiums cost between 1-2% of your gross yearly income – and are also tax-deductible for individuals and business. The cost will depend on your age and occupation and also your nominated waiting period and benefit period.
For a small cost, you get peace of mind that if anything happens, your income is secure. However, your super fund may also offer some form of Income Protection cover...
Income Protection within your super fund (salary
continuance)
Having cover within your super fund can be cost
effective as super funds, due to their large number of members,
will often be able to gain bulk discounts on premiums. Another
benefit is that you won’t be out of pocket on a daily
basis, as the premiums will be automatically deducted from
your super fund.
Yet there are a couple of things to keep in mind. Income Protection insurance within super usually has a maximum benefit period of 2 years so if you are unable to return to work after this time, you will no longer receive benefits.
To ensure this cover is adequate it is possible to compliment insurance in super with a separate policy, which has a longer waiting period. This way, if you are unable to work indefinitely, your benefits from within super will last for a certain period, while you can arrange for your separate insurance benefits to kick in after the waiting period.
It is important to note that premiums within super are not personally tax deductible.
Income protection cover - Things to consider:
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How long is the waiting period before you can receive insurance benefits? |
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How long can you continue to receive benefits? |
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What types of injuries or accidents are included in the policy? |
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Is it more effective to have cover within your super fund or an external policy or both? |
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Have your personal circumstances changed? |
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Your existing cover may need reviewing. |
Are you considering switching super funds or have you changed fund recently?
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Have you switched super funds recently? Your previous insurance cover may have ceased. |
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Does your new super fund offer similar insurance benefits? |
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Are the premiums competitive? |
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Do you have more than one super fund? You may have a double up on insurance policies. |
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Does your new fund have automatic acceptance or will you need a medical check? |
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Will your retirement benefits still be enough if premiums are deducted throughout your working life? |
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Your Count adviser can recommend suitable insurance for your needs and can also review any existing policies you may have. |
| Definitions: Premium: The fee you pay to the insurer to provide protection and cover. Waiting period: The period you wait before receiving benefits or payments after an accident or illness. Benefits: Payments you receive from the insurer in the case of accident or illness. Benefit period: The period for which you receive benefits, which starts after the waiting period. Benefit periods can be up to 65 years of age, but may only be up to 2 years if within super. |
*ABS National Health Survey, 2002.
 Next: Chairman’s Report: Say no to ‘no interest’ specials |
As at
5 July, 2007 |
