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Disclaimer

This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in these articles is for guidance only and should not be relied upon without obtaining professional advice having regard to your direct circumstances.

 

How much is your income worth to you?

We all know that our health is our most important asset... without it life can be pretty miserable. But it's important to realise that if you do lose your health, whether temporarily or permanently that you have protected the other assets in your life.

Consider this: if you earned $50,000 a year for 40 years your income asset would be $2 million. You insure your car, and we'll bet it isn't worth $2m, so why not insure your income?

For those who are employed you may have sick leave and workers' compensation to provide some protection, however if you are self-employed your income might stop if you have to. If you are close to retirement, you may be able to access your superannuation or you may have sufficient financial reserves to tide you over.

For many, the loss of your income-earning capacity could lead to financial ruin, so what can you do to protect yourself and your family?

Protecting your income

Income protection insurance typically provides you with 75% of your income if you are disabled and are unable to do your job. Your occupation is the most important factor in determining the premium - the more risky the job, the higher the premium.

However there are other variables that can affect the premium. For instance:
• A waiting period before the income is paid - the longer the waiting period the lower the premium.
• How long the income is paid for - the longer the benefit period the higher the premium.

Income protection insurance is available through many superannuation funds. Things to look out for are the waiting period - as this can be set for a longer period inside super, and make sure you can select the benefit period - check that you can choose whether you'll receive an income for 2 or 5 years or to age 60 or 65.

Generally though, you'll find a much more "one size fits all" approach inside super and if you find this doesn't meet your needs, much more flexibility and tailoring is available with personal policies.

One-off expenses

Usually when accident or illness strike, other costs crop up such as medical expenses, home nursing care, modifications to housing, child minding... the list can go on.

Trauma or “critical illness” insurance will generally pay out on the occurrence of a specific event - like diagnosis of cancer, heart attack, stroke or coronary artery surgery. Individual policies may cover other events.

Of course, everyone is different, but we all rely heavily on our ability to earn a stable income. A personal assessment of your circumstances can identify the risks and cost effective solutions.

AMP Connections Online
Winter 2008

 


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