It natural for us to want to protect everything we care about. So, why don’t more of us protect our income?
Many of us insure our cars, our houses and our possessions, but how many of us protect our weekly income with income protection insurance? The answer is, no many! In fact, when we surveyed taxpayer data we discovered that only 2% of Australians claimed a tax deduction for income protection.
Consider this fact: More than 25% of people over 30 years old will take more than 6 months off work between now and retirement due to illness or injury.
Can you afford to live without your pay for six months?
What is Income Protection Insurance?
Income protection is one of the most basic forms of life insurance. If you are unable to work and you have income protection, your insurance company will typically pay you 75% of your income for a period of time. How long? It depends on the policy and fees you agree to.
How can I get a tax deduction for my income protection?
The ATO allows you to claim the costs of your income protection premiums for policies taken out separate to your Superannuation. So, if you have income protection as part of your super package, the premium is not tax deductible. If your insurance is a policy outside of your Super, the costs ARE deductible.
(Which for many people means, it makes sense to move income protection out of your super and into a private policy.)
How do I do an income protection check?
Find out if you have income protection so that you know where you stand should anything stop you from being able to work. PLUS check you have your insurance in the right place so that it works financially for you.
- Check the insurance section of your last superannuation statement. Is there any income protection or salary continuance cover?
- Check your employment agreement to see if your employer offers income protection insurance as part of your salary package.
- If you have completed the above checks and still don’t have income protection, you should either:
a. Call your super fund and ask what they can offer you, or
b. Call your favourite insurer
Income protection and other insurances inside your Super can be easier on your wallet but sometimes have high fees that you may not be aware of.
These fees can swallow large chunks of your super earnings so make sure you do a premium health check every now and then.
Remember: You can’t claim a tax deduction if your income protection insurance comes from your super fund, so you might want to compare different insurance options. “Non-Super” income protection insurance fees are tax deductible.