Many people don’t have enough income protection insurance as they feel their Workers Compensation cover is sufficient.
Whilst Workers Compensation provides some cover for employees injured during the course of their work, we were alarmed to learn during the week that the NSW State Government is planning to slash benefits under the Workers Compo scheme, eliminating the ‘journey claim’ which currently covers employees injured while travelling to and from work (‘Compo benefits: how they will change’, Sydney Morning Herald, June 13 2012).
This forced many of us in the office to consider what Workers Compensation actually covers and ensure people are clear on the distinction between Workers Compensation and Income Protection cover.
Whilst laws are different in each state, the following table illustrates some key differences between both types of cover;
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Income Protection insurance |
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Income Protection insurance provides you up to 75% of your gross income p.a. |
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Provides cover 24 hours a day, 7 days a week, whether you are at work or not. |
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Depending on the policy, you can have cover providing you with a benefit until you are age 65 |
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You can be covered up to 75% of your income, thus benefit payments are only limited by your income and can continue to the end of your benefit period. |
According to an illustration prepared by AMP, in NSW Workers Compensation benefits tend to drop significantly after 26 weeks. For an individual with a spouse and two dependent children, your income from Workers Compo would reduce to $680.20 per week after 26 weeks (AMP, 'Do I need income protection?', 2011).
Would that be enough to cover your family’s living expenses?
You can never be too careful when it comes to protecting your standard of living, and income protection ensures you are covered for accidents whether you are at work, on the way to work or outside of work.
As always, if you have any questions or comments or would like to discuss risk protection or any other financial planning issue, please feel free to email us at info@psk.com.au.
Enjoy your weekend guys,
- Michael @ PSK
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