Copyright (c) 2014 Kerrie Peacock
Your income is a significant asset that you must safeguard as much as possible. The Australian Bureau of Statistics reports that Australians had an average full-time weekly income worth $1,437.70 in 2013. This is a valuable flow of revenue that needs to remain constant despite any interruptions to your normal work schedule. The only way to do this is by purchasing an income protection insurance policy.
Do You Need Income Protection Insurance?
There exist various critical reasons why you should buy an income protection insurance policy.
I Safeguard Against Increasing Expenses
Even if you may have some savings or investments, you should still consider an income protection cover. This is because expenses in daily living are constantly rising; hence your savings might not be sufficient to cater for expenses incurred during long periods out of work.
In fact, a report by the Western Australian Council Of Social Service (WACOSS) provides a clear illustration of rising costs in 2013. The report shows that between the 2011/12 and 2012/13 financial period, basic living costs for working families, single parents and unemployed singles increased at a much faster rate compared to their income. The most significant costs involved housing (rent had an increase of 8.6%) and utilities (experienced an increase ranging between 11.7% and 13.2%). Therefore, simply depending on your savings may not sustain you for long periods when you cannot work.
Income protection insurance will provide a regular income flow for extended periods lasting up to 2 years. This ensures your financial stability during your time of need and also enables you to get back to work.
II Insufficient Government Support
The Australian government provides various options for financial support to people who are unable to work due to disability or those who have lost their jobs and are seeking an alternate source of employment. However, such financial support may not be sufficient to cater for all the expense you may have.
One key example is the Newstart Allowance: a form of financial help to support people who are looking for work while they perform activities that can increase their chances of getting a job. This allowance provides a maximum fortnightly payment worth $552.40 to single parents. Such an amount is definitely inadequate to cater for the expenses of a single parent family in Western Australia that has an average weekly expenditure of $935.16 (based on data from a 2013 report by the Western Australian Council Of Social Service (WACOSS)).
Which Type Of Income Protection Cover?
When selecting one type of income protection insurance over another, you should realize that this would affect the premium charged for your policy. Various types of income protection covers include:
a) Indemnity value policy: in this type of cover, your policy will be financially assessed at claim time, rather than the time of applying for cover. Therefore, you would be required to provide relevant financial documents as proof of your income before you can receive your benefit payment. The premiums charged for this type of policy are generally lower compared to an agreed value policy.
b) Agreed value policy: In this type of policy, you must provide proof of your current financial status at the application time. Agreed value policies tend to have higher premiums compared to indemnity value policies.
Article Source: http://www.abcarticledirectory.com
Kerrie Peacock provides useful information to raise awareness of the need for income protection insurance. For more information and advice, log on to www.mecovered.com.au/do-you-need-income-protection-insurance.
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