No insurance? Why take the risk?
On average, only 25% of debilitating injuries occur at work or are work-related.
In 2015/16 there were 101,770 compensation claims made for serious work-related injuries in Australia.
The average time it took for a worker to return to work due to a serious injury rose by 33% to more than five weeks.
In 2016 the median compensation payout for a serious claim was just $10,800.
Insurance – who needs it?
Some people may not need cover. For instance, if you:
* are near retirement and would give up work if you were disabled;
* have lots of sick, annual leave and long service leave to use up convalescing;
* have access to adequate amounts of cash to rely on;
* have a partner or other people who will support you.
Other people may just misunderstand. A common cause of confusion is to think you are covered by worker’s compensation insurance. This, however, only covers accidents at or during work, or illness directly attributed to work. And from the statistics above, the payments received may not be anywhere near enough to cover costs.
If you are not aware of the cover available, read on!
Income protection insurance pays an income to you if you are unable to work due to an accident or illness. The income is usually 75% of your pre-disablement income and is payable after a “waiting period”. You choose the waiting period to suit your needs – for instance, if you had a lot of unused leave you could choose a longer period.
Income protection is particularly valuable for self-employed people, casual workers or anyone else who relies on their income but has no sick leave. You will be required to provide evidence of your usual income when taking out a policy.
The income will be paid until you recover and return to work or for a “benefit period” – this can be as short as one year or up to age 65. Some policies pay a rehabilitation benefit to help ease you back to work.
Income protection insurance premiums are tax deductible. Many people pay the premiums annually near the end of the financial year to bring forward the tax deduction. However, be aware that the income payments are taxable.
Premiums are generally based on your age, gender, occupation and previous medical conditions but you can save money by choosing a longer waiting period and a shorter benefit period. However, there is no point in having insurance that doesn’t pay out when you need it.
If you’re not sure of your specific needs, talk to your financial adviser who can recommend a solution to suit you. Why take the risk?