Tuesday, 29 January 2013

Insurance protection

Once you’ve started accumulating wealth, you need to protect it in the event that you are unable to work temporarily or permanently and to protect your family in the event of an early death.
Key types of insurance to consider include:
  • Income protection insurance
  • Mortgage protection insurance
  • Term life insurance
  • Total and permanent disablement insurance (TPD)
  • Trauma insurance
  • Health insurance
  • General insurance

Income Protection Insurance

Your most valuable asset is your ability to produce an income.  Income protection insurance replaces your income if you are unable to work due to sickness or injury. Some policies provide additional benefits, such as a claims escalation option, day 1 accident benefit, and business expenses benefit.

The cost of income protection varies significantly depending on the waiting period, benefit period, amount of income insured, gender, and the insured occupation.  You may be required to sit a medical examination if you are looking to insure a high salary.

It is very important to read the fine print of the coverage terms.  Some income protection policies cover you if you are unable to work in your specific occupation, while others are more expansive and could require you to return to work in any occupation.

The cost of income protection is fully tax deductible if purchased outside of superannuation.