Understanding why millennials should take out income protection insurance

Published on December 2nd, 2020
  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.
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Even though 62.5% of young people have a degree, 13.3% of youth between the ages of 15 and 24 years old are unemployed; with 18% underemployed. These figures can change: an increasing number of people may lose their jobs, particularly since retrenchments are higher among younger people.

A solution is to take out income protection.

Lower premiums

Premiums for income protection for young people are much lower than for someone older, young people being lower risk. For instance, a male aged 22, with a starting salary of $2 000 monthly, will need to pay $35 a month. By contrast, a 60-year-old male earning $5500 per month will pay $415 monthly for income protection.

Tax benefits

It has been stated by ATO that income protection is tax deductible. However, the cover must be separate from that of superannuation, unless you are self-employed.

Travel benefits

Many young people enjoying travelling, with 10.9% of Australians between the ages 25 to 29 travelling abroad in 2016. There is always a possibility of mishap back home. However, a traveller with income protection can benefit by receiving an economy ticket to return home in the event of an emergency.

The benefit of having funds for rehabilitation

If, for instance, you have been in an accident, and need rehabilitation, income protection allows for access to funds to pay for the treatment. Should you not have cover, you are obliged to foot all the bills from your own pocket, or to depend on family or others. With access to rehabilitation, you can re-join the work force sooner.

Some aspects to be aware of

Certainly the premiums will increase as you age; however, you will have a favourable standing with your insurer, and therefore you can negotiate better rates in the future. However, it is better to view income protection as part of your broader lifestyle-protection solution, than something your parents would opt for. In case you need such benefits, your lifestyle can continue unaffected by loss of salary.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

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