Income Protection insurance is possibly the most essential type of insurance cover because your income determines your standard of living, your ability to build wealth and your capacity to provide for retirement.
It provides you with an income should you become unable to work due to an injury or sickness. Benefits are paid monthly. The amount of cover is usually restricted to 75% of your gross salary. Premiums are tax deductible for most taxpayers and the income is assessable because it replaces lost “assessable” income.
The choice of cover depends entirely on your individual circumstances.
Because of the number of choices, advice from your TPWA adviser is essential.
- Benefit periods can vary from 2 years to age 65 or life for accident cover
- Waiting periods (the time before a claim is paid) can range from 14, 30 or 90 days to even longer
- Maximum benefit calculations for self-employed people can be complex
- Claims benefits can be escalated in line with inflation
- Your occupation determines your premium and some companies exclude some occupations altogether
- Policy definitions can vary greatly between companies especially the definitions of "total disability" and the differences between “own occupation” and “any occupation” and “Indemnity” vs “Agreed Value”
- Premiums can be “Stepped” or “Level”
Business Expenses Insurance
Business Expenses insurance is like Income Protection for your business.
It enables your business to continue to operate if you are temporarily disabled and unable to work.
If your business stops operating, your income might be covered by Income Protection, but if the ongoing expenses of the business – for example rent, business mortgage or loan repayments, equipment leasing costs and utilities payments – aren't covered, the owner might need to use the income protection proceeds to pay those, to keep the business out of bankruptcy.
Ideally, a business owner would have the business's net profit covered by income protection, any loans covered by life insurance – possibly with some TPD cover – and the expenses covered by business expenses insurance.
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