You’ve heard me say it before, but I’ll say it again, “If you owned a printing press that did nothing but print hundred dollar notes all day, you’d insure it wouldn’t you?” Of course!
Consider how long you would be able to cover your day to day expenses if your source of income was suddenly gone. How long would you be able to dip into your savings before you could no longer afford to pay your bills, rent/mortgage, or put food on the table for you and your family?
You wouldn’t think twice about insuring your house or your car, so it should be just as important to insure your income.
In nearly three decades helping clients with their personal insurance requirements, at 5 Financial, we’ve seen a number of clients face situations where they depended on continuing income. And whilst nothing takes away the upset and discomfort of being ill, having a financial buffer in place means there is at least one less thing to worry about.
We generally advise clients to consider having an income protection policy. Income protection cover replaces up to 75% of your income in the event that you are injured or disabled and unable to work for an extended period, following an initial waiting period (commonly 14 – 30 days).
Remember the three months’ worth of income you are aiming to have in a cash reserve for emergencies? Another upside to having this money available is that you can select a longer waiting period in your income protection policy. This can lower your premiums.
Other tips when getting an income protection policy are:
- don’t fall into the trap of opting into a ‘default’ salary continuance option
- beware of accepting ‘over the phone’ policies without knowing exactly what level of cover you are paying for
- the goal for insuring your income is that you will receive the correct amount for the term of your illness.
Now is the time to put your income protection policy in place so you can claim the cost of your premiums in this year’s tax return.
Contact us on 02 9739 6555 if you would like to know more about income protection, or to revisit the adequacy of your current cover.
The information in this article is general in nature. You should obtain professional advice tailored to your circumstances before taking any action.