In this guide
When Australians look for savings in the family budget, insurance is often seen as a ‘nice to have’ rather than an essential. Before you hit delete, it’s important to think twice if you have a policy through your super fund.
Many super funds provide members with cost-effective group income protection (IP) cover that can make a big difference to your family if something goes wrong and you are temporarily unable to work due to injury or illness.
Sometimes called salary continuance, IP insurance is a type of life insurance and is often offered by super funds in conjunction with death and total and permanent disability (TPD) cover.
Learn about TPD insurance.
What is income protection insurance?
Income protection cover insures you against the risk of not being able to earn an income for a certain period of time due to illness or an injury. It does not apply to redundancies or if you are stood down.
IP benefits are usually paid monthly as a substitute for your pre-disability earnings. The payments are up to a maximum amount, usually 75% or 85% of your pre-tax income for the period specified in your policy.
Receiving regular IP payments allows you to focus on getting over your illness or injury, rather than having to worry about how to pay your bills.
IP insurance can be particularly important if you are self-employed, have large debts, or have a family or dependents that rely on your income.
Some super funds provide IP insurance cover automatically, others require you to apply for this type of cover.
Need to know
Superannuation law does not permit income protection benefits through super to exceed your pre-disability earnings.
Income protection benefits are taxed as income in the same way as your normal earnings.
Super tip
Each policy will have a different definition of partial or total disability you need to meet before you can claim on your IP cover.
It’s important to check what your super fund’s income protection policy covers and the definitions it uses for a successful claim. If you review the policy or PDS before you need to make a claim, it can save you a lot of problems and anxiety later.
Leave a Reply
You must be logged in to post a comment.