Income protection insurance policies provide you with security when your financial situation takes an unexpected knock. With an Australian super account, you can continue to provide for your family when you need it the most. You must plan carefully today to protect yourself and your loved ones against salary loss or gaps between jobs.
By purchasing the income protection cover amount that you need, you prepare responsibly for your future and take the stress out of surviving the tough times. Gaps in income can be difficult so make sure you take the right policy on time.
A super account that covers income insurance provides up to 75% of your normal income for a certain period if you cannot work. With super funds that cater to this type of insurance, you can cover most of your everyday expenses, including rent or mortgage repayments, bills, and even groceries.
WORKER’S COMP DIFFERS FROM SALARY PROTECTION INSURANCE
Income Protection differs from worker’s compensation, which only pays out following a workplace injury. The settlement might also attract some conditions regarding permanent disability or a temporary disability and fail to provide total compensation. Our personal advice–don’t rely on worker’s compensation to cover you, especially if you have a high-risk job.
INCOME BENEFITS THROUGH YOUR SUPER
The main advantage of having insurance cover for your income through your superannuation policy is that it can be easier to manage. Your premium payments come from the money in your super account, so you avoid out-of-pocket expenses. And because you pay your insurance premiums while working, you don’t impact your new out-of-work budget.
A policy through your super can also be marginally cheaper than one taken outside of it. However, this is because you usually receive a more basic cover with marginally fewer benefits.
INCOME POLICY PROTECTION AND SUPER FUND DISADVANTAGES
You need to consider a few things before you commit to income insurance through your super.
First, by buying life insurance through your super, you access income protection because it is included in the concessional contribution cap of $25,000 a year. However, you may face severe consequences if you exceed this cap. These consequences are why it is important to always talk with a qualified financial adviser and read the product disclosure statement.
Also, while your premiums are tax-deductible in terms of the fund, your payments after an income protection claim are taxable. This taxation applies regardless of where you obtain this type of cover because the insurance payouts replace your regular income.
So, our general advice is to calculate your expenses carefully before committing to this policy type for income protection. If you buy cover and receive less than you need, you will waste the insurance. This risk is why we always recommend you speak to a financial adviser about how much cover you need before deciding. Also, account for inflation as ignoring this factor may overshadow your benefit payments.
More importantly, you need to go through a waiting period once you claim since it must receive approval from the insurer and the fund trustee. If the claim is approved, the insurer makes the benefit payments to the trustee, who then sends the funds to you. This process means there is always a waiting period to receive any benefit, but this timeframe will depend on each claim.
Finally, keep in mind that Income Protection through your super usually comes with a default level of cover, although you can pursue a more comprehensive policy depending on your circumstances.
So while income protection insurance through super does provide regular income through your illness or injury, talk to insurance experts to sort out the complexities. The thing to note is you must choose a policy that fits your budget and your lifestyle. And while the target market determination tmd is suitable for anyone who works and needs to protect their income, you should always access professional advice.
DISADVANTAGES OF SUPER FUNDS FOR SALARY PROTECTION INSURANCE
- You may only qualify for a limited cover.
- You could exceed your concessional contributions cap, with detrimental consequences.
- You can pay your premiums even if money is tight
- Tax may be payable on some benefits
- If you don’t nominate a beneficiary, your super account provider decides who gets your payout if you die.
- You may not need a health check, depending on the fund and insurance types
- There can be delays in the payout of your benefits, but it will speed things up to have your product identification number spin on hand when you submit a claim
BENEFITS OF INCOME PROTECTION PREMIUMS
Even a basic level policy will give you a regular income should you be unable to work but ensure you file your claim within the specified benefit payment period.
Once you sign up for income or life insurance, you will get the best possible protection.
It’s easy to manage since premiums are automatically deducted from your super, and you can take advantage of significant tax perks.
Even limited cover can give you enough financial support until you recover or acquire new employment.
You can login, join the Wealthsmart website, and receive your superannuation fund number sfn to organize the maximum amount of cover for a specified period for up to two years or longer.
The World Health Organisation is concerned that mental health has become a more significant risk during these unprecedented times. Therefore, insurance cover is critical for peace of mind and a sustainable lifestyle to protect yourself from job losses due to economic decline and mental stressors. Obtain more information about insurance cover by accessing general advice and specific expert tips to safeguard your money flow today.