Income Protect Plan: How to Choose the Right One for Your Career
As a business owner, your income is vital for supporting yourself and your family. An unexpected illness or injury can lead to a loss of earnings that jeopardises your financial security. This is where an income protect plan can help.
An income protect plan, also known as income insurance or earnings protection, replaces part of your income if you are unable to work due to illness or injury. When choosing the right plan for your career, there are several key factors to consider.
Assess Your Income Needs
First, analyse your current income and expenses to determine how much coverage you would need. An income protect plan typically replaces 50-70% of your earnings. You’ll need to choose a monthly benefit amount that covers your essential living costs.
Account for your mortgage or rent payments, utility bills, food, transportation, and other necessities. Don’t forget to factor in expenses for family members or dependants too. Having a clear grasp of your income needs ensures your plan provides adequate financial protection.
Match the Benefit Period to Your Profession
The benefit period is the maximum length of time the policy will provide payments if you are unable to work. For most careers, experts recommend choosing a benefit period of at least 1 to 2 years.
Consider your line of work and how long it could take you to recover and return to your occupation before choosing the benefit period.
Understand the Waiting Period
The waiting period is the time between being unable to work and the start of benefit payments. Typical options range from 1, 3, 6 or 12 months. Choosing a longer waiting period lowers premiums but means going without income for longer before payments begin.
Assess your existing savings and sick leave to pick an appropriate waiting period. Having 3-6 months of accessible savings can allow you to better manage a longer waiting period if needed.
Compare Definitions of Disability
Income protection plans have different definitions of disability that trigger benefit payments. More lenient definitions mean you qualify for payments faster, while strict definitions may exclude some conditions or injuries.
Compare “Own Occupation” definitions where you qualify if unable to perform your regular work, vs. “Any Occupation” definitions which also consider your ability to do other jobs. Understand when you would begin receiving payments.
Consider Inflation Protection
Many plans allow you to add an inflation protection rider. This ensures your benefit payments keep pace with inflation every year so they don’t lose purchasing power. Adding this rider typically increases premiums but can provide valuable long term protection and avoid the need to increase coverage later.
Review Policy Exclusions
Carefully check the exclusions section for any circumstances that would prevent you from receiving benefit payments. Mental health conditions, stress, and chronic fatigue may have exclusions depending on the insurer.
Look for more inclusive policies providing suitable coverage for your individual health profile and line of work. Ask your insurer to explain any unclear exclusions.
Protect Your Income with Brisco
Choosing the appropriate income protection requires assessing your financial needs, comparing policy definitions and features, and finding a competitively priced plan suited for your profession.
At Brisco Business Insurance, we offer comprehensive money insurance plans to help business owners protect their incomes in the event of unexpected illness or injury.
Compare quotes today to discuss your needs and receive a personalised quote. With the right income protect plan in place, you can protect your livelihood despite life’s uncertainties.
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