Protecting your home by guest blogger Doug Smith

Protecting your home

There is little doubt that income protection (IP) insurance is a valuable form of insurance for any working Australian. Most of us recognise the importance of protecting the assets we have accumulated over the years and rightly so, we’ve worked hard to get them. But have you thought about protecting your income? After all, it’s your income that enables you to own a house, maintain a car and go on holidays.

Each year approximately 1 million Australians experience serious injuries or illness that either require hospitalisation or prevent them from working.

How does Income Protection work?

Income Protection (IP) pays a monthly benefit, usually equal to a maximum of 75 per cent of gross income, if you are unable to work due to sickness, illness or injury. Some IP policies will even cover your mortgage repayments for a period of time. Your benefit payments commence after an agreed waiting period (usually 30, 60 or 90 days), and continues for the period specified in the policy (the benefit period). People can return to work part time and still receive part payments, depending on policy wording.

What about the cost?

Income protection premiums are usually 100% tax deductible if the policy is owned by you personally. One other solution is to take out IP cover through your superannuation fund. Here’s an example.

Susan is a 36-year-old consultant, in good health, and earning an annual salary of $100,000. With a mortgage and two young children, Susan can’t squeeze the insurance into an already stretched budget. She can however pay for the insurance from her super fund.

Susan would like a waiting period of 30 days and benefits to be payable until she is age 65. She also would like the benefits paid to be the equivalent of 75 per cent of her salary. Susan’s income can now be covered and her day-to-day cash flow is not compromised.

To find out how to protect your income and have your super fund pay the premiums contact Doug Smith at Defined Financial Advantage on (08) 9284 4680 or 0432 366 424.