You insure your home and contents as well as your car, but how much do you think about insurance that protects your income? Find out if income protection is right for you.
If you can’t work due to illness or injury, income protection typically covers up to 75 per cent of your salary. How much you pay in premiums depends on things like your job and risk profile.
Here are some pointers to help you decide if income protection is worth it for you.
When to get income protection
When you start working regularly and earning an income, that’s a good place to start. Even if you’re still living at home, you still need to think about what would happen if you couldn’t work from now until retirement. It happens, unfortunately. For some people, that’s a reality from a young age.
How to work out how much you need
Many factors will determine how much income protection you need. If you’re in a relationship, for example, here are some things you should consider:
- Is your partner working?
- How much does the partner contribute to household expenses?
- Are they paying half of the mortgage or rent?
- Do they help pay school fees?
- What would happen if I couldn't work tomorrow?
- Could we stay in our home and pay school fees?
Sit down with those you love who are income earners and have the conversation. Ask those questions and you’ll soon see what you wouldn't be able to cover if something happened.
Factors that influence cost
Premiums vary from a few hundred dollars per month to several thousand. One of the key things to know about income protection is that choosing a shorter waiting periods (30 to 90 days) and a longer benefit period (two years, for example), will increase the cost. Other factors which influence costs include your age, salary and if you have any pre-existing medical conditions.
Understanding waiting periods
You can figure out what sort of waiting period is suitable for you by looking at your current savings, expenses and debt, including credit cards, personal loans and mortgage. If you have lots of savings, you might be able to extend your waiting period to 90 days or longer. If you can wait a few months before you need a payment, it can make income insurance more affordable.
What benefit period do you need?
It's about getting a product that matches your needs and how much you can afford. For some people, there’s peace of mind knowing they have a benefit period that goes up to retirement.
People often think default policies from employers, or through superannuation, with a salary continuance for two years is enough. But if you're 35 and can't go back to work, two years might not be good for you.
Find out more about Income Protection Insurance with MetLife Australia.
While care has been taken in preparing this content, MetLife Insurance Limited (ABN 75 004 274 882, AFSL 238096) (MetLife) does not warrant or represent that the information, opinions or conclusions contained in this information are accurate. The information provided is general information only and is current as at the time of production. It has been prepared without taking into account your personal objectives, financial situation or needs and you should consider whether it is appropriate for you. It is not intended to be a substitute for professional advice and should not be relied upon as such. MetLife recommends that you obtain independent and specific advice from appropriate professionals before implementing a financial strategy, including reading any relevant product disclosure statements and/or terms and conditions.
Before deciding whether to acquire, or continuing to hold, any of our products, please read the Product Disclosure Statement and Target Market Determination available at metlife.com.au. MetLife Protect is issued by MetLife and MetLife Protect Super is issued by Equity Trustees Superannuation Limited
(ABN 50 055 641 757, AFSL 229757) (ETSL).