Gareth Daniels from Income Solutions
Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee
Are you looking at purchasing your first home or planning on starting a family soon? If so this is the perfect time to look at getting an income protection insurance policy in place or re-evaluating your current policy.
Buying a new home or starting a family, or both, is such an exciting time and you’re probably getting lots of different opinions from family and friends on what you should be doing, so let’s break down the facts.
What is Income Protection Insurance?
Essentially, it pays up to 75% of your income if you are unable to work due to injury or illness. If you have debt, dependants, or both. We all know that whether your income is coming in or not, the bills still need to be paid. It is advisable to have income protection insurance to help pay those bills and support your loved ones in unforeseen circumstances.
When paying your income protection insurance, you have main 2 options, paying through your superannuation fund or paying directly from your income.
Paying through your super fund
If you choose to pay your income protection through your super fund, it will cover the premium giving you more money in your pocket to pay for other things. This strategy is useful if you are trying to pay down your mortgage or have school fees to pay as the premium is coming from your superannuation, not your wage, so there is more money in your pocket to pay down your mortgage or pay for childcare or school fees.
However, there can be some restrictions on claims, dependant on your policy, we advise that you speak to your financial advisor to clarify these specifics.
Paying income protection from your wage
Alternatively, you can pay your premium straight from your wage, and in many cases, this can prove a greater tax deduction compared to the tax rebate that will be paid into your super fund.
For example, take the average Australian wage of $60,000. This person will pay around 32.5% tax each financial year (not including the Medicare levy). If they pay their income protection insurance from their wage they will get back about 32.5% of that premium at tax time.
How do I know if I have the right cover?
These days everyone has a super fund, and you may have a level of income protection insurance by default, however this policy may not be right for your personal situation. So, feel free to grab your super fund statement and come in for a coffee and a chat and we can look at the right coverage for your current situation.
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.
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