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Life Insurance and Income Protection 101 for Families

Sponsored by iSelect.

I’m about to share something with you that I wish I didn’t have to, but I thought some of you might appreciate the reminder.

As most of you know, four years ago, I was diagnosed with breast cancer. Thankfully, that’s behind me now – but I still can remember the moment it all sank in and the realisation hit, a few days later, that I didn’t have life insurance or income protection.

It wasn’t just ‘one of those things’ I forgot to do, either. I’d been on the phone to my bank in the very week I was diagnosed. I had the quote, I just hadn’t made the time to say “yes, please go ahead”.

I still kick myself now – because finding an insurer that will take me on isn’t an easy task.

If it had been my car, home or health, it wouldn’t have been an issue. Having those things insured is always highest on my priority list. Even before kids.

But, insuring my ‘life’ and protecting my income – well, that was something I put in the ‘too hard’ basket.

I’d always had cover through my employers before but was now at a time when I wasn’t covered. I don’t want to spend time thinking of what might have happened, but I did want to share my story about that.

Anyway, that little reminder is over, and I’ve teamed up with iSelect who have done the work I should have done to make choosing an insurer stress-free and simple. They’ve broken down Life Insurance and Income Protection so you can decide if you need it.

Mim Jenkinson

Life Insurance and Income Protection – the facts

From iSelect:

Life Insurance

What is life insurance?

Life insurance is designed to provide assistance for your beneficiaries (such as children) should you die, or are diagnosed with a terminal illness where death is likely to occur within a short period (subject to the terms of your policy). Most life insurance policies pay a lump sum, which can help your family to continue meeting financial obligations, including:

  • Mortgage, rent and car payments.
  • Everyday living expenses and bills.
  • Funeral and estate-related costs.
  • Education expenses for your children.
  • Any outstanding debts.

Before deciding on a level of insurance review the insurers’ Product Disclosure Statement (PDS) which will outline information about policy inclusions, limitations and exclusions.

What are the different types of life insurance?

There are generally four types of life insurance designed to cover a range of different scenarios:

  • Life insurance. Term life insurance (or death cover) is insurance which generally provides a lump sum payment for your beneficiaries (such as spouse and dependents) upon death.
  • Trauma cover. This is insurance for critical illnesses, such as cancer, strokes and heart attacks. It is paid in a lump sum to help cover medical expenses and ongoing recovery and rehabilitation costs.
  • Total & permanent disability (TPD). This can cover for permanent loss of work due to serious illness or injury and is generally paid in a lump sum.
  • Income protection. Depending on the policy and insurer, this can generally provide up to 75 percent of your regular work income due to illness or injury for a specified period. Income protection is often paid in regular monthly installments.

Income Protection

What is Income Protection?

Income protection insurance can replace a percentage of your income in the event that you’re unable to work because of injury, accident or illness. If an insured event was to take place, this policy type can provide an income, generally up to 75% of your gross wages, for a set period of time payable either weekly or monthly which allows you to recover with peace of mind.

What are some benefits of income protection?

  • Income replacement. Can provide up to 75 percent of your annual income so you can manage your expenses if you’re unable to work due to injury, accident or illness.
  • Often paid as a monthly benefit. You’ll generally receive monthly payments to help cover your everyday expenses.
  • Choice of benefit period. Benefit periods generally range from two years all the way up to 65 years (depending on eligibility).
  • Choice of waiting period. Depending on eligibility, you can choose different waiting periods anywhere from two weeks to two years.
  • Can be funded through super. In some cases, income protection can be funded through superannuation, which means it wouldn’t impact your take-home pay. Bear in mind that policies paid for through superannuation are not tax-deductible.

In some cases, your income protection insurance premiums may qualify as a tax deduction, potentially making the choice to protect your income a more affordable part of your monthly budget.

Who needs income protection insurance?

While everyone’s situation is different, income protection insurance could be a consideration for someone who:

  • Is the sole income earner in their household.
  • Their family relies on their income.
  • Has car payments, a mortgage or rent.
  • Is self-employed.
  • Has a specialist occupation e.g. medical professional.

Key factors that determine the level of cover you may be eligible to receive can include your age, occupation, income and health (including any pre-existing conditions). Your occupation may also have an impact on the type of cover you need. 

Life Insurance and Income Protection – find out more

The unthinkable can happen – and now I’m at the other side of my scare, I’m much more mindful about what ‘planning for the future’ really means for my family.

A life insurance policy will depend on your income, age and family situation. Use the iSelect Life Insurance Calculator to work out how much cover you might decide you need or call 13 19 20.

Disclaimer:

iSelect does not compare all life insurers or policies in the market. We therefore don’t compare policies offered by life insurers who are not our providers. We maintain an internal list of approved life insurance policies that our advisers compare from all of our providers. We call this our ‘Approved Product List’. We have commercial arrangements with each of the providers.

iSelect Life Pty Ltd – ABN 89 124 304 347, AFS Licence Number 331128. Any advice provided by iSelect is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice iSelect gives you, having regard to your personal situation, before acting on iSelect’s advice or purchasing any policies . You should consider iSelect’s Financial Services Guide which provides information about iSelect services and your rights as a client of iSelect. iSelect receives commission for each policy sold. Click here to view our range of providers.

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I acknowledge the Traditional Custodians of the land I work and live on, the Awabakal peoples, and pay my respects to Elders past and present.
I thank them wholeheartedly and express my love and gratitude for the privilege to live and work in such a beautiful part of the world and for the opportunity for my family to be part of this vibrant and supportive community.

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