What’s Your Most Important Asset?

No, we don’t mean what body part you love the most, we’re talking about items of monetary value that you or your business owns.

When you think about what assets are most important to you, what comes to mind first?

  • home/investment property
  • car
  • boat/caravan
  • expensive jewellery
  • other valuable contents you own

We consider these things the most valuable because they cost us plenty of hard-earned money in the first place, and then we spend more to protect them from accidental damages, weather, theft or loss.

But have you thought about protecting what pays for those assets? One of your most valuable assets, above all else, is actually your income.

Why Should I Consider Income Protection?

What happens if you or your partner can’t earn an income?
Who pays the bills/mortgage/medical costs?
How does that impact on your aspirations for the future?
These are the questions worth your consideration if you want to continue paying for all those other valuable assets. You, and your income, should be the most important asset to protect on the top of your list.

So, what is income protection? 

Your income earning ability can be insured with income protection insurance. Basically, if you get sick or injured and can no longer work, the insurance allows you to still receive a portion of your income to cover the day-to-day expenses until you can return to work.
It’s essential to protect your income against unexpected events that could temporarily prevent you from working. Income protection insurance can provide financial support during these challenging times.

What do I need to consider when getting income protection?

Here are some key points to consider:
  1. Coverage Amount: You can typically insure up to 75% of your pre-tax income, but you can opt for a lower cover if it suits your needs and reduces insurance costs.
  2. Benefit Period: You can choose how long you want the benefit to last, ranging from two or five years to policies that cover you until age 65.
  3. Waiting Period: You can select a waiting period before the benefit period starts, such as 30, 60, or 90 days, or a 2-year option. Longer waiting periods might lower your premium but consider your savings and the possibility of a quicker recovery.
  4. Insurance through Super: Your superannuation (super) fund may offer income protection insurance, which can be cheaper due to bulk buying. However, the default cover may not be tailored to your circumstances, so you might need to apply for additional or increased cover.
  5. Tax Deductibility: Income protection premiums are usually tax-deductible if the policy is held personally, while super funds claim the deduction if it’s within super. Speak with a financial adviser to understand possible deductions.
  6. Income and Tax: Payments received from income protection insurance claims are considered income and must be included in your tax return.
  7. Benefit Calculation: Your benefit amount is typically based on your income at the time of claim, and ‘agreed value’ cover is no longer available (with grandfathering for existing policies).
  8. Offset Clause: Some policies may include an offset clause, allowing the insurer to reduce the benefit if you receive other income during the same period.
  9. Pre-existing Conditions: If you have pre-existing medical conditions, the insurer might increase premiums, exclude the condition from coverage, or reject your application.
  10. Read the PDS: Review the insurer’s Product Disclosure Statement (PDS) carefully to understand the policy’s limitations, exclusions, and other important details.

Not sure? Leave it to the experts to help guide you!

It’s essential to assess your needs, financial situation, and the potential risks you face before selecting an income protection insurance policy.
Consulting with a financial adviser can help you make informed decisions about protecting your income and securing your financial future. Please reach out to our expert Gild Wealth team to seek advice: https://thegildgroup.com/wealth/