Income protection insurance
Save through your super fund
Most people assume that they’ll earn a wage or salary until the day they retire. But what happens if, for some reason, you’re unable to work for a period of time?
Will you (and/or your family) have enough to live on? Will you be able to cover your mortgage or other loans?
Income protection insurance is designed to ease these concerns, by paying up to 75% of your current income if an injury or illness results in you not working for a period of time.
If you’re under 25, be aware that from 1 April 2020 you are no longer provided with automatic insurance cover. If you want to be covered, you will need to apply to your fund for cover. However, there are exceptions to this rule for those who are considered to be working in dangerous occupations. Super funds are also prohibited from automatically providing insurance cover for low balance members until their super account has a balance of $6,000. Existing members who had a balance of $6,000 or over at any time from 1 November 2019 to 1 April 2020 are excluded from this prohibition. However, it is important to remember that you must leave sufficient funds in your super account to pay for your insurance premiums.
Who should get income insurance?
You should consider income protection if:
- You have family that relies on your income, and/or
- You’re the sole income-earner, and/or
- You work in a high-risk job or industry, and/or
- You have a mortgage.
Cover through super
The majority of superannuation funds offer some level of income protection cover as an optional extra to their members, with insurance premiums determined by how much you want to be covered for.
Usually, your cover will be in the form of a percentage of your current income.
What’s more, since super funds in Australia have huge buying power, they’re generally able to negotiate better rates than most individuals.
Income protection insurance comparison
| Comparison table | Income Protection insurance in super | Income Protection insurance outside super |
|---|---|---|
| How is the insurance premium paid? | Regular deduction from your super | Paid directly by you |
| How are policies renewed? | Automatically | By letter |
| Can providers get volume discounts? | Yes | Not usually |
| Is it part of my super? | Yes – by opting in | No – it’s additional |
Working out the right level of cover
Because everyone is different, it’s worthwhile taking the time to compare different income protection insurance policies, and to calculate your potential needs if you’re unable to work for a while due to injury or illness.
Usually, the more people in your household, and/or the greater the debt you have, the more cover you’ll need.
There is normally a waiting period of 30 to 180 days before benefit payments begin, and payments are generally limited to a maximum of two years.
It is also important to note that you can only insure income that you receive from personal effort or work, which means you can’t insure income from investments etc.
Getting or tailoring insurance through an Industry SuperFund
If you’re already a member of an Industry SuperFund, all you need to do is check your latest superannuation statement to see if you have income protection insurance cover, and if so, what your current level of cover is. If you want to add to it, alter it, or start it, simply call your fund and chat to one of their consultants about a quote.
If you’re not an Industry SuperFund member, you can join up easily. Just choose the Industry SuperFund that’s right for you, head to their website and follow the links.
Your question will be sent directly to the fund you select