What Income Protection Is

1. Protection Against Illness or Accident
   • Purpose: Income protection provides coverage if you’re unable to work due to illness or injury. It ensures that you receive a replacement income while you’re unable to earn.
   • Deferred Period: When setting up a policy, you choose a deferred period (the waiting time before benefits start), which can range from 4 to 52 weeks. A longer deferred period generally means lower premiums.

1. Replacement Income
   • Function: The policy replaces your income, paying you a regular sum based on your income protection benefit level. You’ll need to submit your tax credit certificate, and payments are made as if they were your regular salary.

1. Ongoing Payments Until Retirement
   • Duration: Benefits are typically paid until your retirement age, ensuring continuous income support. If you return to work before retirement, the payments will stop.

1. Tax Relievable
   • Tax Benefits: Premiums for income protection are considered a tax-relievable expense, which means you can reduce your tax bill based on your marginal tax rate.

What Income Protection Is Not

1. Not a Lump Sum Payment
   • Payment Type: Income protection provides regular monthly payments, not a one-time lump sum. For lump sum protection against specific illnesses, you might want to explore Specified Illness Cover.

1. Not Limited to Specific Illnesses
   • Coverage: Claims are based on your inability to work due to any illness or accident, rather than a predefined list of illnesses.

1. Not for Redundancy
   • Scope: Income protection does not cover unemployment due to redundancy. It’s designed specifically for situations where you cannot work due to health issues.

1. Not an Income for Life
   • Payment Limits: Benefits continue until you either recover and return to work or reach retirement age. Some policies offer options to protect pension contributions, helping ensure that retirement planning remains on track.

Why Income Protection Matters

Income protection acts as a crucial safety net, often referred to as the “glue” that holds together your financial plans. Without a steady income, other financial commitments—such as your mortgage, pension, and daily expenses—can become jeopardised.

Next Steps: To fully understand how income protection can benefit you and to choose the right policy for your needs, it’s wise to consult with a Financial Broker. They can provide personalised advice, help you navigate the options available, and ensure that you have a plan in place to safeguard your future income and peace of mind.