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