Published 24 Mar 2015
Anyone can suffer a serious accident or an illness that may prevent them from going to work. This may not be a problem at first, but you could begin to experience financial problems the longer you are away from your job.
Income protection insurance is designed to provide you with a safety net so that you can continue receiving a salary even if you take months or even years to recover from your injury or sickness.
This type of cover can be obtained through a traditional insurance policy or via your superannuation benefits, although there are often differences in the extent of coverage between the two.
If you're unsure whether or not to buy income protection insurance, here are some key questions to ask yourself.
1. Am I the sole provider in the household?
An extended period off work is much more financially troubling if you are the sole money earner for your family. This is particularly true if your injury or sickness requires a partner to provide care, preventing them from seeking employment.
2. Is my employment status a factor?
Some people will be more adversely affected by time off work than others. If you are self-employed or freelancing, for example, you will not have any leave entitlements such as sick pay.
As such, the impact on your finances will be immediate and potentially crippling. Income protection can prove invaluable in these circumstances.
3. How much emergency cash do I have?
Whether it's a healthy savings pot, access to leave entitlement or even generous friends and family, you should calculate how much cash is available to you in an emergency situation.
Make sure to take into account any medical costs or other expenses that could result from your accident or illness when totting up your reserves.
4. Can I afford to take the risk?
Ultimately, the choice of whether or not to purchase income protection insurance will come down to your personal circumstances and financial responsibilities. If you have a family to support and mortgage repayments to cover, you may not want to risk the chance of being caught out.
Making an income protection claim
Income protection policies can be complex and you may find you're having difficulties making a claim even if you've taken out coverage.
If this is this case, contact a superannuation disputes lawyer to learn more about the benefits to which you are entitled.