Insurance within super
Income protection within super
Section: 10.5
10.5 Income protection within super
Income protection, also known as salary continuance insurance, is a type of insurance policy that provides financial protection to individuals in the event of illness, injury, or disability that prevents them from working and earning an income. In the context of superannuation in Australia, income protection insurance is often offered as an optional benefit within a superannuation fund.
When you have income protection insurance within your superannuation, it means that you are covered for a portion of your income if you are unable to work due to a covered event. The specific terms and conditions of the policy, such as the waiting period before benefits kick in and the benefit period, can vary depending on the insurance provider and the superannuation fund.
Key features of income protection insurance within superannuation
| Income Replacement: | If you are unable to work due to illness or injury, income protection insurance can provide a regular income stream, usually a percentage of your pre-disability income, to help cover your living expenses. The benefit payments are typically made monthly and are subject to a waiting period. |
| Waiting Period: | The waiting period refers to the length of time you must be unable to work before you become eligible to receive benefit payments. Waiting periods can range from a few weeks to several months, and you can choose the waiting period that suits your needs when you set up the policy. |
| Benefit Period: | The benefit period is the maximum length of time that benefit payments will be made if you remain unable to work. Benefit periods can vary but are typically set for a specific number of years or until a certain age, such as age 65. |
| Premiums: | The cost of income protection insurance is paid through your superannuation contributions. The premiums may vary based on factors such as your age, occupation, benefit period, waiting period, and the level of cover you choose. |
| Taxation: | Premiums paid for income protection insurance within superannuation are generally NOT tax-deductible for the member |
Significant changes to income protection insurance in Australia from 2020
Changes were introduced by APRA and aimed to address sustainability concerns and improve the quality of insurance products.
Key Changes
- Agreed value policies are no longer sold since April 2020.
- Benefit payments are now based on the insured person's income over the preceding 12 months.
- The maximum coverage term for income protection policies is proposed to be limited to five years from July 2021.
- Guaranteed renewability is no longer required, allowing insurers to alter terms or decline policy renewals.
Last modified: Friday, June 23, 2023