There is no denying that income is important. But equally important is ensuring that your income is not disrupted, so you have the means to cover your day-to-day expenses and other financial obligations.

Australian statistics show that there is a greater than 60% chance that you will be unable to work for at least one month during your working life due to an illness or injury, and a 40% chance that you will be unable to work for more than three months.* Research shows that 38% of working Australians could not survive one month without their income before needing to sell assets, and 20% could survive less than three months. These alarming statistics highlight the importance of ensuring that your income is protected effectively.†

This research also shows that temporary disablement is far more common than permanent disablement. For this reason, it is essential that you have effective income protection insurance in place, as this covers partial, temporary and permanent disablement. It is quite common for people to have Total and Permanent Disability (TPD) insurance, usually through their super fund, but they don’t have any income protection insurance.

Because of the way TPD insurance is structured, the only way these people will receive any financial relief in the event of disablement is if they are totally and permanently disabled and are unlikely to work in their occupation ever again. Usually, TPD insurance requires you to also be unable to work in any similar occupation after considering your education and experience, before a payment under the policy can be made. The odds of suffering a disability severe enough to meet these requirements are significantly lower than the odds of suffering a partial or temporary disability, which is why TPD insurance is typically not an effective way to protect your income. TPD insurance is useful for covering any financial requirements on top of what is provided by
income protection insurance.

Do you have enough for the future?

It is quite common for people to have income protection cover that is well below their incomes, but just enough to cover day-to-day expenses. This can be problematic if the allowance for tax has not been considered, as income protection benefits are taxable as personal income. What is also often overlooked is the importance of disposable income in meeting longer term financial goals.

As income protection benefits typically cease at the age of 65, it is vital that you have sufficient investment assets when benefits do cease to continue to provide the income you need beyond 65.

Your disposable income has a significant role in building your financial assets and wealth over time, so it is important that this portion of your income is properly protected.
Loss of income is the greatest statistical risk to your financial position, so talk to your Elston adviser about how to protect your income effectively.*

* Interim Report of the Disability Committee – Institute of Actuaries of Australia 2000
† Zurich Misinsurance whitepaper Feb 2014

If you would like more information please call 1300 ELSTON or email info@elston.com.au and an adviser will be in touch.