Income Protection Insurance

Income is your most important asset.

So many of us are quick to insure our homes, cars and boats but don’t place the same importance on insuring the income that paid for those assets in the first place. Your ability to earn an income is your most important asset. Think about it, your lifestyle depends on it. If an accident or illness prevented you from earning an income, would you be able to continue to pay your bills and afford the lifestyle you currently enjoy? Income Protection insurance plays a vital role in protecting your income and your lifestyle.

Income Protection insurance, also known as Salary Continuance, pays a monthly benefit of up to 75% of your income if you are unable to work due to illness or injury. The money can help you meet regular financial commitments and stay on top of debt during what could be a very stressful time.

Income Protection is available for employees or self-employed individuals provided you are working more than 25 hours per week. Policies may be owned by you as the life insured, your SMSF or any other legal entity. In the event of a claim, proceeds are paid to the policy owner, so personal ownership is usually preferred. In most cases, the premium is tax deductible although any benefit received should be included in your tax return.

When you purchase Income Protection cover, you are required to nominate a Waiting Period and a Benefit Period. The Waiting Period relates to the time you are off work before you lodge a claim for benefits. You can choose either a 4 or 13 week waiting period; the longer the waiting period, the less expensive the premium. A shorter waiting period may be more expensive but of greater benefit if you do not have sufficient emergency funds to cover this time off work.

A Benefit Period is the period for which claim benefits will be paid and, as you would expect, the longer the Benefit Period, the more expensive the premium. You may select either a 1, 2 or 5 year Benefit Period.

Income Protection provides the following built-in benefits:

• Total Disability – a monthly benefit that covers up to 75% of your income if you are Totally Disabled at the end of your waiting period.
• Inflation Protection – an annual automatic increase to your cover to ensure your benefit keeps pace with inflation and maintains its value.
• Recurrent Disability – if a disability recurs from the same or a related cause within 12 months of a claim ending, it is treated as a continuation of the original claim. You will not need to serve an additional Waiting Period.
• Waiver of Premium – while you are a receiving a benefit for Total Disability, your Income Protection premiums will be waived.

Why do I need it?

If you calculate how much you earn, multiply that by how many years you have until retirement and then factor in inflation and pay increases, you will see it quickly adds up to a lot of money that would be lost if you were to suffer a long-term medical condition without some form of protection.

As an example:

A 38 year old Electrician earns $75,000 per year as an employee.

Assuming he remains employed and gets a 3% increase in wages per year, he will earn a total of approx. $3.2m at the age of 65. This is worth insuring!

Calculate your Income Protection insurance needs

What are the chances?

Statistics show that:

• The risk of being diagnosed with cancer in Australia before age 75 is 1 in 3¹
• 1.1 million Australians are disabled long-term by heart attack, stroke or vascular disease²
• 690,000 Australians were injured at work in 2005-2006 with 43% unable to receive any financial assistance³
• More than 15% of Australians will be disabled for more than three months during their working life⁴

Examples of Income Protection Insurance claims:

If you have any questions, please see our Frequently Asked Questions (FAQ) page. Alternatively, to discuss your options, please call us on 1800 808 027 or email admin@fcadirect.com.au.

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