With the cost of living increasing in Australia securing an occupation that offers a higher salary has become a priority just to stay on top of the regular expenses accrued during daily life. With smart budgeting and foresight regarding forthcoming debts an individual can be prepared for their routine financial responsibilities.
Unfortunately life is anything but predictable and just as you might have gotten into an established payment routine for your bills, repayments, and mortgage an unexpected and unwanted setback will force you to take an extended period of time off of work. While annual and sick leave does cover a number of days per year prolonged absences need to be covered to ensure that you don’t fall behind in payments and end up owing money to utilities providers, banks, and landlords.
Income Protection is a valuable insurance policy designed to ensure that if you are unable to work due to illness or injury you will continue to receive an amount of money (a percentage of your regular income) per month for a varying period of time.
Payments into Income Protection Insurance (also known as IPI) are made by the policy holder in monthly intervals and vary based on how much the holder earns. The major Australian banks each operate their own IPI and generally offer repayments of up to 75% of the individual’s income over a standard period of two years. IPI policies also contain a waiting period (the time the policy holder needs to be incapable of working before receiving income protection) that vary based on policy and the type of impairment that the policy holder is suffering from.
Given the nature of the policy the Australian Tax Office allows policy holders to be able to claim the cost of the premiums they pay as a deduction as long as the amount they receive is included in their tax return, however policy holders are unable to claim deductions for premiums associated with:
- Critical care insurance
- Life insurance
- Trauma insurance
As comprehensive and straightforward as all of that sounds there are some very real risks associated with income protection, chief among them being that the income protection insurance policy that the holder takes out will not cover them for their particular injury or impairment. It is also very important to know that most income protection policies do not cover a loss of income in the event that the policy holder loses their job or is made redundant.
Ultimately when it comes to your earnings there is no such thing as playing it too safe, it pays to be fully prepared for the unforeseeable and to ensure that a minor setback does not become the point in your life where it all fell apart.
There are many income protection policies available with each one offering their own differing options and perks for potential policy holders.
Please contact i3Group for any payroll related matters on 1300 725 647.