Income Insurance

Income Insurance, also known as income protection insurance, has become a much talked about type of insurance policy in recent years and more so with the recent global financial crisis (GFC). Income insurance is designed specifically to protect your income should you suffer a sickness or accident and unable to work. 

What is covered by Income Insurance?

Income Insurance or income protection is specifically designed to cover the income you generate from your “personal exertion”. Personal exertion income is essentially income that you generate by physically attending to or performing duties to generate an income. In essence it is income generated from working. 

For employees this income is generally the same income you may have listed on your group certificate. For self employed persons it is generally calculated to be your business turnover less your business expenses which equals your personal exertion income. Each life insurance company does offer slightly different calculations for a self employed person however these are very close to the above calculation. Other incomes that can be included in your income is your superannuation, fringe benefits and travel or meal allowances that you may receive as part of your total remuneration package. 

Things that may be typically excluded from the income insurance policy include things like: 

• Net rental income from investment properties
• Dividends
• Royalties
• Ongoing commissions
• Centerlink benefits
• And generally any income not generated by your personal exertion, income that would continue if you were in good health or not

Benefits of Income Insurance

Income Insurance covers you for 75% of your salary and is designed to provide you with an ongoing income until either the end of the benefit period or unil you are well and able to return to work. These policies only cover you for sickness & accidents and are not designed for covering people for redundancies. These policies are also very broad in a sense that they can cover you for literally thousands of sickness or accidents which may keep you off work for longer than the waiting period.

Income Insurance policies are fully tax deductible. This means that should you have an income insurance policy you can claim the premiums as a deduction when you complete your tax return. However as the ATO has provided you with a deduction in protecting your income, when you make a claim on your policy you also need to include the benefit payments as income in your assessable income calculation.

Are all income insurance polices the same?

Income Insurance policies are certainly not all the same, they range dramatically in what they offer in benefits and as such this has a bearing on the price of these policies. Basically you get what you pay for in an income insurance policy.

However they do come under some other commonly used names such as income protection insurance, income protection, or sickness and accident insurance.

Exclusive Offer! Call xLife on 1300 135 205 today and
save up to 20% on your first year’s income protection premium.

December 2009