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So, you're keen to protect against any loss of income should you become ill, injured or gain a permanent disability? Then income protection insurance is something to look into. Once you have decided it's worth your while, you will need to choose what option you're after - temporary or permanent disability cover. The choice is yours.
Temporary or permanent disability cover
Permanent disability insurance provides for you if you can not resume work in any occupation for which you are trained or experienced in. It will cover the equivalent of what you would have received if you had worked until your expected retirement age.
Temporary disability insurance applies if you are expected to eventually return to work.
Payments may provide a pension-type payment until you return to work, but it all depends upon your fund. You will also have to take into account your accumulated sick leave and other leave entitlements.
Disability insurance can be useful for anyone on an income in the event of the unfortunate happening. It assists in paying for the usual bills that continue to spew forth or in looking after dependents. This can include if you're the main breadwinner or run the ship in your household and your partner has to reduce their work to cover for you.
It can become more pressing when you're 35-plus as you are 10 times more likely to gain a disability than die once you have reached this age.
Temporary disability coverage
So, what's an example of when disability insurance can help? Try this on for size. A single 29-year-old woman, with a mortgage of $200,000, car loan of $11,000 and credit card debt of $1500, snaps her anterior cruciate ligament playing sport (that's in the knee joint) and requires surgery.
She will be off work for six weeks and housebound and needs four months of physiotherapy afterwards. Her mum takes time off her full-time job to come to stay with her for the first two weeks after the operation.
By taking out temporary disability insurance earlier on for the sum of about $600 to $900 a year, the young lass could have 75 per cent of her monthly pre-tax earnings after expenses covered. And, being a single person, the twentysomething could also get coverage for the cost of her parent giving up her work temporarily to care for her. Hence, disability cover is worth looking into.
