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Income Protection Insurance

What is the purpose of Income Protection Insurance?

Income Protection Insurance replaces your income from employment should you become ill or injured to the point where you are unable to work temporarily or indefinitely. Without this protection, it would be difficult to meet day to day costs, service loans, meet additional medical costs and continue to save for your retirement.Live Life

Income Protection policies will pay you an income for the nominated period of time (benefit period) after a nominated waiting period. The premiums are tax deductible and any benefits received should you claim will form part of your assessable income in the year they are received.

What level of cover is appropriate?

“Insurable” income is all income that can be regarded as having been generated from your “personal exertion” (passive income from investments is not insurable).Your maximum allowable benefit is 75% of your insurable earnings.

Tax Considerations

The benefit paid is a before tax amount. Tax will be payable at your marginal rate.

Contract Selection

It is important to note that not all Income Protection Policy contracts are the same. They can have different definitions for Total Disablement, Partial Disablement which determine when a claim is payable, and different offsets which may reduce the amount you are paid if you are in receipt of income from other sources while on claim. It is these differences that mean some contracts provide much better cover than others, and therefore may be more expensive.

When choosing a policy cost, policy definitions and claims management experience should always be taken into consideration.

If you want to know more contact a Specialist SMSF Solutions adviser today, on 02 4942 0280.