Once you have elected to protect your income through Income Protection  Insurance there are a number of variables to consider. The right choice is  dependant upon your personal circumstances.

An agreed value policy as the name suggests is where your income is assessed  when applying for Income Protection Insurance and you are then covered for a set  amount. The advantage of this is that you know what you are covered for no  matter what happens regarding changes to your level of income. The downside is  the policies are more expensive.

An indemnity policy on the other hand  is where you prove your income at  the time of making a claim. If you income has decreased you will receive a smaller benefit. 

The general concensus is for self-employed or people with varied income  agreed value policies are a better option. There is a school of thought that  when you can get it you should always utilise an agreed value policy to provide  certainty.

As with all thing financial planning related we recommend you seek advice to  ascertain what is best for you. If you would like further information please  contact us.

Disclaimer
The information on these pages is provided in good faith and is to  the best of our knowledge accurate. We provide it without any warranty as to its  correctness of statement or opinion or its suitability for any particular purpose. Any advice on this blog/website is of necessity general in nature and not specifically tailored to suit differing individual circumstances. For that, you must seek and we advise that you do seek financial advice from a licensed professional. Southern Advisory can accept no liability for any decisions that you may make based on the information on this blog/website

One of the big achievements for us in life is moving out of the family home and gaining independence.

Whether you are single flatting in a trendy suburb or married with children out in the suburbs. I think this is something Gen X and Gen Y take for granted.

The reality of life is that there is a direct correlation between our finances and independence.

Just have a think about what would happen if you no longer had the capacity to earn an income due to illness or injury. Sure you’ve got your sick leave but then what happens??

Some of us (the minority) have adequate insurance and dependant upon the condition would get a combination of income protection payments, trauma /total and permanent disability (TPD) lump sums.

Some of us have default insurance (the majority) in their superannuation funds which is probably underinsured. One example I had this week is income protection insurance with a benefit amount of $850 per month, life/TPD insurance of $150,000. Do you think you could pay the mortgage off $850 per month?

The rest have no financial protection in place at all.

As an example consider this scenario and have a think about if it related to you. You’re a single 20 something year old living in a trendy inner city suburb. Lets say your earning $80,000 per annum and your rent is $500 per week plus other living costs including the car payments etc. You are unable to work due to illness for 6 months and have about 1 month sick leave. You have $10,000 you’ve saved to buy your first property and you’ve got 6 months to go on your lease.

After one month you’re income from work ceases, after another 2 months your savings are gone. Your $850 per month may cover food and some bills. What choices do you have then. Get a loan? Break your lease and move back in with your parents? Ask your parents for money? I don’t think you’d be happy with these thoughts!

Now consider the above scenario with a family and mortgage…. You get my point.

Life, TPD, trauma and income protection insurances can be utilises to protect your finances. Please give this some thought today and contact me if you have any questions.

There is a common misconception that workers' compensation cover is sufficient to look after you in the event that you are unable to work. 

The reality is that workers compensation is there to protect employers from workplace claims from employees, please do not make the mistake of thinking that as you are covered by workers' compensation then you do not need income protection insurance. 

Income Protection vs Workers’ Compensation

Workers’ Compensation has different benefits and laws in each state but the key differences between the two types of cover are as follows:

Workers' compensation as stated above is designed to protect employers from employee workplace related claims. This does vary by state however an example of coverage is due to recent legislative change in NSW travel to and from work is no longer covered.

There are generally four types of payments if injured at work:
• Income replacement
• Permanent impairment
• Death benefits
• Medical expenses
 
There is generally a capping of the benefit period after 130 weeks unless the person is totally incapacitated, or if partially fit to work – they are working at least 15 hours per week.

Benefit Payments generally vary depending on length of time on claim and whether client is
totally unfit to work or meets partial incapacity. Generally the amount reduces after 13 weeks on claim.

One benefit to employees is that employers foot the bill for this cover. 

Income protection insurance on the other hand is designed to protect your most important asset being your income. It replaces up to 75% of income to cover bills and other day to day expenses. 

Cover is 24 hours a day, 365 days a year anywhere in the world and is used for when you are sick or injured and unable to work. Benefits vary dependant on contract but can be paid to age 70. Premiums are tax deductible and cost as little as $4 per day. 

Please note for sole traders and partnerships workers' compensation doesn't apply whereas income protection is available.

To support the need for Income Protection please consider the following facts - 

• 75% of Australians that were injured between 2005 – 2006, suffered the injury outside of work^

 • Less than 36% of people receiving financial assistance following a work-related injury, received financial assistance through Workers’ Compensation*

 • Over 2.6 million Australians aged under 65 are living with a physical disability#, including conditions like cancer, stroke, heart disease and depression, that in many cases will not be covered by Workers’ Compensation.

One of the key points from my perspective is that as the employer is footing the bill then it is essentially common sense to assume cover will only look after you at work. 

Let myself, Sean Thomas from Southern Advisory review your specific situation to ensure you have some cover in place. Call 0405 313 630 or email me sean@southernadvisory.com.au.


 # AIHW (2008) Australia’s Health 2008, Cat. no. AUS 99, Canberra
*  Australian Bureau of Statistics, Work-Related injuries 2009 – 2010.
^ http://www.abs.gov.au/ausstats/abs@.nsf/mf/4825.0.55.001/accessed
on 30 August 2012.


Disclaimer
The information on these pages is provided in good faith and is to the best of our knowledge accurate. We provide it without any warranty as to its correctness of statement or opinion or its suitability for any particular purpose. Any advice on this blog/website is of necessity general in nature and not specifically tailored to suit differing individual circumstances. For that, you must seek and we advise that you do seek financial advice from a licensed professional. Sean Thomas can accept no liability for any decisions that you may make based on the information on this blog/website


 

The reality is for most people your ability to earn an income is the biggest asset of your life. By insuring this income it can give you peace and mind that should you be unable to work you can still make those mortgage repayments and protect your family.

What is income protection?

Should you be unable to work due to illness or injury, income protection insurance can replace up to 75% of your employment related income until you are able to return to work. Income protection insurance is tax deductible and can be held inside or outside superannuation.

Why do I need Income Protection Insurance?

Are your house and contents insured? What about your car? If you go overseas do you take out travel insurance? Most of us recognise the importance of protecting the assets we have accumulated over the years and rightly so, as we’ve worked hard to get them.

But have you ever thought about protecting your ability to work?

After all, it’s your income that enables you to own a house, maintain a car and take holidays.

Ask yourself the implications of being unable to work, how much sick leave would you have? Do you have savings to tide you over? What about your mortgage, school fees or simply putting food on the table.

The reality for personal trainers is your career is more dependent upon physical activity and if you are physically unable to work income protection insurance can then pay up to 75% of your income to protect your financial obligations.

But I’m already covered

Are you sure about this??  

Sick leave – how much have you got saved up or are you self-employed?

Workers’ compensation – covers workers for injuries only associated within the workplace. However, most serious accidents occur outside the workplace, leaving those without

income protection cover vulnerable. You can have world-wide cover through income protection insurance.

Insurance in superannuation – Review your current policy because it is likely to be non-existent or inadequate.

Social security – the funds available from the Government should not be treated as a solution and most benefits are assets and means tested.

Some options to consider

Income protection insurance has a number of options which impact the cost the main options are as follows –

Waiting period

This is the period of time you must be unable to work before your benefits start the shorter the period the high the cost. For personal trainers the waiting period is generally 30 days.

Benefit amount

The maximum amount that you can cover is 75% of your pre-tax income. The higher the benefit the higher the cost.

Benefit period

This relates to the length of time that you can receive benefits whilst on claim. For personal trainers this varies dependent upon the provider but it’s generally 2 or 5 years however to age 65 is possible. The longer the benefit period the higher the cost.

Stepped or level premiums

The basic analogy is stepped premiums are initially cheaper however level premiums present significant long term cost savings as stepped premiums get more expensive with age due to increased risk. By taking out level premiums you can keep your costs down when you are at an age when more susceptible to making a claim.

Not all policies are the same

As an example a good feature for a personal trainer is day 1 accident benefit. This feature varies between companies for example two insurers may pay from day 1 however with the first you need to be off work for 30 consecutive days to the have your claim backdated to day one and for the other you have to be unable to work for 3 days only to have your benefit backdated.

As a personal trainer I believe that a shorter period for day 1 accident cover is important because as with the nature of the job and the associated lifestyle there is a higher chance of injury leading the a short period off work than with a lot of other occupations.

When getting your income protection insurance I recommend getting advice from a professional. You need to be aware that this represents just one piece in your financial puzzle. Please feel free to giving me a call on 0405 31 36 30 or flick me an email sean@southernadvisory.com.au

Disclaimer
The information on these pages is provided in good faith and is to the best of our knowledge accurate. We provide it without any warranty as to its correctness of statement or opinion or its suitability for any particular purpose. Any advice on this blog/website is of necessity general in nature and not specifically tailored to suit differing individual circumstances. For that, you must seek and we advise that you do seek financial advice from a licensed professional. Sean Thomas can accept no liability for any decisions that you may make based on the information on this blog/website.