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,” says Katrina Mellor, MetLife’s Head of Business Services. “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

Katrina says 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,” says Katrina. “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,” says Katrina. “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,” says Katrina. “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.

Income protection through your employer

The pandemic is making many of us consider the level of cover we have through our employer. With many people on reduced income or not working at the moment, it’s important to be aware of the implications if your income protection is through your employer but you’re no longer with that employer. Can you keep it and what does it now cost?

Find out more about Income Protection Insurance with MetLife Australia.