Is income protection worth it right now?

If you can’t work due to illness or injury, income protection typically covers up to 75% of your salary. How much you pay in premiums depends on things like your age, job, salary, your existing health, the benefit and waiting period you select.

Here are some pointers to help you decide if income protection is worth it for you.

When to get income protection – it’s not just for ‘older’ people

Even if you’re still living at home, younger people still need to think about what would happen if you couldn’t work for let’s say 18 months. If you’ve got a car loan, or perhaps a joint investment property with a sibling, how will you fund those repayments if you aren’t able to work for an extended period of time?

Many younger people think they can just get insurance later. But it’s often much simpler when you’re younger, particularly if you don’t have any existing medical conditions.

How to work out how much you need

Many factors will determine how much income protection you need. If you’re in a relationship, for example, here are some things you should consider:

• Is your partner working?
• How much does your partner contribute to household expenses?
• Is your partner paying half of the mortgage or rent?
• What would happen if you couldn't work tomorrow?

Factors that influence cost

Premiums vary from a few hundred dollars each month to several thousand. One of the key things to know about income protection is that choosing a shorter waiting period (30 to 90 days) and a longer benefit period (five years, for example), will increase the cost. Other factors which influence costs include your age, salary and if you have any pre-existing medical conditions.

Understanding waiting periods

You can figure out what sort of waiting period is suitable for you by looking at your current savings, expenses and debts, including credit cards, personal loans and mortgage. If you have lots of savings, or lots of sick leave, you might be able to extend your waiting period to 90 days or longer. If you can wait a few months before you need a payment, it can make income insurance more affordable.

What benefit period do you need?

It's about getting a product that matches your needs and how much you can afford. For some people, there’s peace of mind knowing they have a benefit period that goes up to retirement.

People often think default policies from employers, or through super, with a benefit period for two years is enough. But if you're 30 and can't go back to work for a long time, two years might not be suitable for you.

Are you covered?

In some circumstances, you may have default or fixed income protection cover with your Spirit Super account. Default cover is automatically provided if you work for an eligible employer and after certain conditions are met. You can apply at any time for fixed cover, but you’ll need to be accepted by our insurer. For more information about income protection, including default cover, eligibility conditions, definitions and costs, you can read our Insurance guide.

If you already have income protection, it’s important to review the level of income protection you have, particularly if your personal circumstances have changed. You can review and manage your income protection in Member Online or by calling us on 1800 005 166.

Article supplied by MetLife Australia, our insurance partner.