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Income Protection
If you think about it, the most valuable thing in your life as far as your dependants are concerned isn’t what you own – It is your ability to earn an income. Take that away and you could be facing serious financial hardship.
Income protection provides an income for up to 2 years if you are unable to work temporarily because you are ‘totally disabled’ as a result of an injury or illness. Provided your claim is covered under the insurance policy, the benefit starts after a waiting period of 90 days and continues to be paid for up to 2 years.
Cover is subject to you meeting eligibility criteria and providing the required health evidence. The cost of the cover will depend on your age, gender and occupation.
Your occupational category will be determined by the insurer. The occupational classification is based on duties you perform, not your job title. The categories are:
Category 1 – Professional, administrative and managerial occupations which involve office duties or skilled occupations with very light manual duties with no exposure to unusual occupational hazards. Includes accountant, office staff, school teacher, sales staff not engaged in heavy lifting or deliveries, radiologist, surveyor, dental nurse.
Category 2 - Qualified trades people performing skilled specialised manual work or other skilled occupations in non-hazardous industries not involving heavy manual work. Includes registered nurse, electrician, butcher, cabinetmaker, mechanic, plumber (not roof plumber), baker, supermarket cashier.
Category 3 - Employees engaged in heavier manual work in non-hazardous industries. Includes bricklayer, painter, panel beater, cook, waiter, cleaner, bus driver, shop fitter, carpenter, ceiling fixer.
Category 4 - Employees engaged in heavy manual work or more hazardous occupations. Includes roof tiler and roof plumber, security guard, labourer, courier driver, floor tiler, taxi driver, carpet layer.
To determine how much Income Protection Insurance will cost, simply determine the category of your occupation then download the weekly insurance charges for income protection.
The maximum amount of benefit is 75% of your monthly salary, subject to an overall maximum of $20,000 per month (equivalent to a salary of $320,000 per annum).
Let’s look at Andrew
Andrew is a 30 year old electrician with a young family and a mortgage. He earns $60,000 a year ($5,000 a month), including overtime and allowances.
As the main breadwinner, he is concerned that the loss of his income – even temporarily – would cause problems meeting the family’s outgoing.
Andrew’s sick pay provisions are quite limited so he decides that for peace of mind, he should look at income protection insurance. This would pay up to 75% of his monthly income if he was sick or injured and off work for an extended period of 3 months or more, i.e.
up to $5,000 x 75% = $3,750 which, rounded up to the next $100, is $3,800 a month.
Electricians are in occupational category 2, so Andrew works out the cost of this cover as follows:
Monthly benefit ÷ 100 x weekly cost (from the table on page 13, category 2, male, aged 30)
$3,800 ÷ 100 x $0.0393 = $1.49 a week.
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Click here to calculate your own level of Income Protection.
As with death & disability cover, there are conditions, definitions and exclusions that apply to income protection insurance. It is important that if you are considering Income protection that you read Asset’s Guide to Insurance and the Super Member PDS. |
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