Protecting Income


Imagine this…You own a home, have a mortgage, a wife and 2 young children. You are fit, healthy and have not visited the doctor in years. You are also in a comfortable financial situation to keep your finances ticking along if you were knocked down for a couple of months. But out of nowhere, you fall ill or have a serious accident and are unable to work for 12 months… maybe longer. How will you pay your mortgage, bills and other expenses while continuing to support your family as the primary breadwinner in your household? Sonner or later the money you have will run out – and then what?

Without an income, you could run down your savings very quickly and face financial difficulty. This is where income protection comes in. Income protection could be the biggest factor standing between maintaining your current lifestyle/standard of living and serious financial hardship.

How to protect your income:

Most people insure their life, cars, home, and valuables. But they do not adequately protect what is potentially their greatest asset – their ability to earn an income. How could you afford to pay for anything if you are not earning an income?

As such, rather than putting yourself and/or your family’s lifestyle and wellbeing at risk, by taking out income protection insurance, you could receive a monthly benefit of up to 75% of your gross (pre-tax) income to replace your lost earnings while you recover and get back on your feet.

Most income protection policies offer a range of waiting periods before you start receiving your insurance benefit (with options normally between 14 days and 5 years). This choice will offer flexibility to ensure premiums can be affordable to you based on your individual circumstances and cashflow position while ensuring you have sufficient cover in place.

You can also choose from a range of benefit payment periods, with options normally ranging between 2 years to age 70 to ensure you have sufficient peace of mind during a period of uncertainty ensuring cashflow can continue, which in essence acts as a back-up payroll for yourself and the family.

The shorter the waiting period (30-90 days) and the longer benefit period (age 65) the more you pay. Other factors that influence the cost of premiums could be occupation, age, salary, or pre-existing medical conditions.

It is also important to determine whether you need income protection insurance and to review your insurance needs over time to make sure you remain suitably covered based on your circumstances.