Do you have adequate income protection?

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on November 25th, 2021       

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Your job and your health are two things that are not guaranteed in life. This is more reason why you need to get income protection to help cover you when the unexpected happens. It’s easy to understand and will help you continue the lifestyle you have come to know even if you fall ill or sustain an injury at work.

70% of people don’t know how they can protect their income

A global survey conducted by Zurich financial services found that 7 out of 10 people in the survey did not know how they could protect their income. Out of those respondents, 44% had already suffered a loss of income due to accident or illness.

Income protection comes is a policy that offers you up to 75% of your salary should you become ill, sustain an injury that prevents you from working, or become redundant. It helps maintain the lifestyle you had while you were working instead of suffering a loss of income because of unforeseeable events.

The survey by Zurich further showed that 1 in 5 people of the working population could survive less than a month without their income, which is more reason why you need adequate cover.

Australians remain underinsured

When it comes to taking care of factors that will affect our families and lives we tend to underinsure which is costing us in more ways than one. Data by Lifewise showed that 45% of Australians are underinsured by USD 728 million when it comes to income protection.

Furthermore, the survey by Zurich showed that despite the fact that 44% of Australians have experienced a loss of income due to sickness or accident only 27% had protected their income. Having adequate insurance can protect you from these curveballs that life throws at you.

Relying on your superannuation can have its shortfalls

Having a ‘we will be alright’ attitude is something that won’t work when it comes to protecting your income. With 95% of Australians lacking adequate income protection cover it’s important that you don’t be comfortable with a cover that you don’t fully understand.

Having income protection through your superannuation has helped many who have a tight budget, but still want to provide for their families. However, these policies generally have a limited benefit period and ill-defined policy definitions.

Superannuation’s offer a default policy that won’t be tailored towards your specific circumstance and the stage of life you are at. This can cause you to become underinsured.

Shop and compare for policies

Settling for the first policy that you come across will be doing yourself a huge injustice. If you are worried about the footwork that you need to do, you can use comparison sites that will give you quotes that match your needs. The important thing is that you shop around and compare before settling.

For peace of mind that you are adequately insured you can speak to an insurer who will help provide a quote that suits the stage of life that you and your circumstances. See if the features apply to what you are looking for and ask questions regarding the benefit period which is usually 2 to 5 years. The age limit of taking out an income protection policy is usually around 60 or 65.

Understand that not all insurance policies are created the same, but to get a clearer understanding you can enlist the help of a professional who will help you find you the best cover for your buck.

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