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Why Do I Need Income Protection Insurance?

30 Jul 2013 2:49 PM - Joshua Stega, Financial Adviser, Sydney.

What is Income Protection and Why Do I Need It?

People often ask JAS Wealth, if I am aged between 30 and 40 years of age, what is the one absolutely crucial wealth tool I should have in place. Our simple answer is income protection insurance.

Did you know that 1 in 3 people will be forced out of work for a minimum of three months, due to a disability before the age of 65 years?

We also know that most young people living in Sydney could not maintain their current standard of living if they did not have an income for 3 months. Sure you probably have sick leave, holiday pay and some savings in the bank but really think about how you would cope if an injury forced you out of the workplace for a certain amount of time.

What is more is that your level of financial responsibility is often increasing each year during your 30’s. Each year more money seems to get spent on things such as your lifestyle, holidays, mortgages, weddings, investments, kids. When you consider the average mortgage in Sydney is around $500,000, there is often very limited breathing room if something unexpected occurs.

The good news is that we have the solution and what’s more it is tax deductible.

Case in point, we just completed an income protection policy for an up and coming lawyer. For just under $1,000 we were able to put in place a policy covering up to the maximum 75% of his current income until age 65 years. What is more we were able to put in place a level premium policy which means this is the price he will pay each and every year until the policy is no longer needed (age 65 years). He will pay the premium annually on the 25 June 2013 and get a tax deduction as soon as he receives his PAYG summary and does his tax return. Not a bad outcome for a guy who is just about to get married and purchase a new property.

To us insurance is essentially a case of fake it, until you make it. Put the protections in place (fake it) until you have built enough wealth to be able to support your lifestyle without having to work (make it).

What should you do?

Check your current superannuation statement and ask your employer whether you have any income protection policies in place.

Insurance Facts You Need to Know

There is a reason why 95% of the Australian population are under-insured. Personal insurances can be confusing. 

This ebook covers some of the following issues:

1.  Even non-income earners need to be insured;

2. Inside or Outside super?

3. Protect your greatest asset; your income;

4.  Different ways of protecting you in case of sickness or injury.

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The Wealth Guy | Joshua Stega Financial Adviser Sydney

Joshua Stega, is head of financial advice at JAS Wealth (privately owned financial planning firm in Sydney). He helps successful individuals manage their wealth. He has a Masters in Taxation & Financial Planning, is a Fellow of the Taxation Institute, a SMSF Specialist Advisor and has significant direct investment experience.    Google+     Twitter     LinkedIn     Facebook     Instagram

M.TaxFP, LLB(Hons), B.Bus(Acc), FTI, Adv.DipFP, DipFP, SMSF Specialist