Most people know the importance of insurance. We insure our cars so that if we have an accident, we don’t have to pay out of pocket for all of the repairs and additional bills that may go along with it. We have medical insurance so that in case we get sick, and we have help paying expensive medical bills. Homes, business assets, personal belongings and life insurance are also common types of policies. A car or a piece of business equipment is an asset, but do you know what the most important asset of all is?
You! Therefore income protection insurance is the most important insurance you need!
You go to work every day, or run your business to make money. If your car breaks, you can get another one or make repairs to it. If a piece of business equipment breaks down, you can repair it as well. But what happens if you fails? How are the bills going to get paid if you’re “out of service”?
Don’t let an unforeseen accident or injury leave you in a financial hardship. By having income protection insurance, you have the peace of mind of knowing that if anything ever happens, you will still be able to support yourself and your family financially. Let’s take a minute to over a few key points of income protection insurance and tax considerations that go along with having a policy in place.
Key Points of Income Protection Insurance
- You get paid a monthly benefit while ill or injured.
- The maximum amount of the benefit per month depends on your previous earnings, any waiting period attached to the policy, the length of time for the benefits, your age, sex, what you do for a living and if you smoke or not.
- There are many types of policies so it’s important to do your homework. For example, you’ll want to go with a policy that’s not cancellable.
- You may be able to obtain a policy which pays 75% of your income, but again, it’s important to read the policy thoroughly to determine any restrictions or limitations.
Tax and Other Considerations for Income Protection Policies
- Business owners who have their business set up as a family trust, but have individual income protection policies should be aware that taxes can actually increase as 100% of the policy will be paid to the individual. The policy can be changed to the family trust in order to lessen taxes.
- Employees may find an income protection policy attached to their superannuation. This tends to make policies more affordable.
The most important consideration when it comes to an income protection policy is to seek professional advice. Many factors and considerations that need to be taken into account in order to find the best policy for you. A planner and/or advisor can help you make the decisions that will best help protect your income, yourself and your family, while also taking taxes into consideration.