Understanding why millennials should take out income protection insurance

Last updated on November 25th, 2021 at 02:55 pm by Bill Tsouvalas

Many young people are indifferent to protecting their income. It could be that this type of cover is misunderstood or simply unknown to them. Either way, the value of such insurance should not be underrated.

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.