Personal Income Protection – The biggest risk to your financial security and how YOU can avoid it.

Personal Income Protection – The biggest risk to your financial security and how YOU can avoid it.

Did you know 60% of Australian families with dependants will run out of money within 12 months if the main income earner cannot work?

This is a startling fact and serves as a wakeup call that life can often throw a few curve balls.

No one expects accident or illness – but what if something did happen? How would you and your family cope financially?

Many people don’t hesitate to insure physical assets such as their home, contents and motor vehicles, but what about their greatest asset of all – their ability to earn an income?

Does this sound all too familiar?

If so, you need to consider Income Protection insurance.

4 ways Income Protection insurance will benefit you

  1. Receive up to 75% of your pre-tax income if you are unable to work due to illness or injury;
  2. Meet your family living expenses while you recover;
  3. Avoid having to draw down on your savings to fund your income; and
  4. Reduce the amount of tax you pay.

If you don’t have Income Protection insurance, how would you get by without your income?

Think about this.

How would you meet your household expenses, mortgage repayments and lifestyle expenses if your income stopped yesterday? How long would it take before you ran into financial difficulty? If your income was to stop, your savings could be exhausted very quickly.

Taking out Income Protection insurance can reduce your risk of financial difficulty if your income stops. By protecting up to 75% of your income before tax, you can continue to meet household expenses and mortgage repayments if you can’t work for an extended period.

Reduce your tax bill!

The premiums for Income Protection Insurance are generally tax deductible. This means you can claim the cost of your policy when completing your tax return. The tax deduction can reduce the cost of your insurance by up to 45 per cent!

What is your income really worth?

If you had an asset worth $3,806,033 would you want to protect it?

As shown in the table below, this is how much you could earn between now and age 65 if you are currently 35 and earn $80,000 pa.

Your earnings between now and age 65

Income now (pa)

     Age now

25 35 45 55
$30,000 $2,262,038 $1,427,262 $801,111 $343,916
$50,000 $3,770,063 $2,378,771 $1,343,519 $573,194
$80,000 $6,032,101 $3,806,033 $2,149,630 $917,110
$100,000 $7,540,126 $4,757,542 $2,687,037 $1,146,388
$150,000 $11,310,189 7,136,312 $4,030,556 $1,719,582
Assumptions: income increases by 3% pa, no breaks in employment, taxation ignored.


Don’t put off protecting your income any longer
– contact Financial Planning Expert on 1300 721 174 or at info@financialplanningexpert.com.au to arrange an obligation free consultation with an insurance specialist today.

How Income Protection can protect your family

Donna owns XYZ Tupperware Pty Ltd and earns $80,000 pa. Her husband stays at home to look after their 2 young children. Donna’s home is worth $600,000 and she has a mortgage of $400,000. Donna wants to be able to meet her family’s living expenses and mortgage repayments if she becomes sick or injured and can’t work.

Unfortunately for Donna, the unthinkable happens and she is involved in a skiing accident and is unable to work for nine months. Fortunately, Donna spoke to Financial Planning Expert and arranged Income Protection insurance before the accident happened.

Donna was able to claim on her policy and receive a monthly benefit of $5,000 (75% of her usual income). Donna’s payments started after her initial 30 day waiting period, during which time her savings were able to meet household living expenses and mortgage repayments. After nine months, Donna had received a total of $40,000 in payments from her Income Protection policy. This allowed her to continue meeting her family’s living expenses and mortgage repayments while she was away from work.

Had Donna not taken out Income Protection insurance before the accident, she may have run into financial difficulty. Without payments from her insurance policy, Donna may have struggled to meet her household expenses, mortgage repayments and medical expenses from savings or other financial resources (e.g. selling assets to raise cash).

How you can take out Income Protection insurance

Contact an insurance specialist at Financial Planning Expert for further information. We can determine whether you need Income Protection insurance and advise you of the most cost-effective package. We can also ensure your insurance is structured tax-effectively and can calculate how much tax you could save.

To speak with Financial Planning Expert about Income Protection insurance or other financial planning matters – contact us on 03 9708 8126 or at info@financialplanningexpert.com.au.


This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax advice prior to acting on this information.

Opinions constitute our judgement at the time of issue and are subject to change. Financial Planning Expert Pty Ltd does not give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

© Copyright 2011-2014 Financial Planning Expert Pty Ltd

ABN: 71 545 756 841 Australian Financial Services License: 402042

Phone: (03) 9708 8126

Email: info@financialplanningexpert.com.au

 

 

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    Financial Planning Expert is an independent financial planning business based in Melbourne. We provide genuinely independent and conflict free financial advice. We’re experts in self-managed superannuation fund (SMSFs) advice and strategy, retirement planning, property and share investment advice, life and income protection insurance, tax planning, asset protection, estate planning and advice for Australian expatriates.