Income insurance is probably one of the most boring things to talk about when you are well and healthy, though the moment you find yourself in a position requiring it, you will be filled with regret at your ignorance for not taking action and protecting yourself and your loved ones.
So why is it that we know we should insure ourselves, yet often we fold this type of discussion up into neat little piles and push to the back of our mind?
In honesty I believe it is because as humans we are programmed to fear death or disability, so the idea of planning for it is rather macabre. Combine this with the lack of knowledge around such insurance, we find ourselves as the most under insured country per person (according to recent media reports).
With this in mind, let’s look at what income protection insurance is and the best way to get it while sticking to a budget.
So what is income insurance?
It is exactly as it sounds, it gives you the ability to ensure your regular income should you find yourself in a position of sickness or injury.
Imagine if you broke a leg, rendering yourself unable to work for 2-3 months, you could use up your sick leave, use up your annual leave (if you have any) yet still need to take unpaid leave, this insurance would cover you, meaning you wouldn’t fall behind.
In simple terms, if you are unable to work, this insurance will look to still give you a regular income while you are unwell.
It could potentially cover:
General expenses and bills
Did you know that it is tax deductable?
Now for the best part. Not many people know that income protection insurance is tax deductable. Not just partially deductable, we are talking fully deductable.
The trick is that when you do buy income protection insurance, it is often bundled with TPD insurance and other forms of life insurance. Make sure you ask your insurer to separate the costs for income insurance so that come tax time, you can make a full claim to offset that money.
So you understand income protection insurance, now what?
Speak with a professional. Ask them to ensure it covers all your requirements. Income protection insurance is about protecting your current lifestyle. You don’t want to have to sell the house due to taking 3 months off work due to sickness.
Planning for sickness is not fun, but trust me, you cannot afford to not have income protection insurance in this day and age.
Alex Wilson is the founder and editor of Savings Guide, Australia’s number one saving money website. For regular money saving tips, visit Savings Guide or follow Savings Guide on Facebook.