For some, income protection insurance is a necessity. Income protection is a type of insurance that can provide aid in cases of sickness or disability. While it often can’t completely replace a paycheck, it can help both short-term and long-term needs.
This alone would make income protection insurance a valuable asset. However, it has added benefits for your taxable income, as well. From basic coverage to long-term disability insurance, there are certain tax deductions that you can take regardless of your own occupation. Here are some of the key benefits you need to know.
Income protection offers tax deductions.
For policies that are taken out and are separate from your Superannuation, the ATO allows you to claim the costs of your premium. This means that, as long as your income protection policy is outside of your Super, your premium costs are deductible. For many, it makes sense to move your insurance policy from your Super to a private insurer. If you don’t currently have a disability policy or disability benefit, you may want to ask your insurer about additional coverage. One insurance company may offer a better monthly payment or monthly benefit than another, as well, so look for these added bonuses.
Check for income protection insurance on your Superannuation.
If you’re unsure of whether or not your Super offers income protection, long-term disability insurance, or short-term disability insurance, you should look through your policy. During the underwriting process, some Supers include these automatically. This can impact a successful claim to a deduction depending on your individual policy. Even if you speak to an underwriter, there are no guarantees so you should know how to interpret the fine print yourself.
There are a few steps to take when ensuring that your financial protection is in the right spot should you need workers’ compensation or other income and health insurance. First, check your last Superannuation statement. Look for the insurance section and review whether or not income protection is present. Then, take a look at your employer’s group policies. Depending on your own occupation or profession, the benefit amount may vary. Look for any income protection insurance here, too. If you’ve checked for both and there isn’t any insurance present, contact your favorite disability insurers to discuss your benefit amount, tax deductions, and group policies.
Of course, even if you have general health insurance bundled with your Super or through your employer, you may still want to find a third-party provider for your income protection. With all of the options that are available, it’s important to make the right choice. Unlike the United States which has automated programs through the Social Security Administration, you may need to do some of the legwork on your own.
Find the right protection plan for your needs.
There are a few things that you should keep in mind if you want to take advantage of the tax deductions offered by income protection. First, you’ll want to look at the waiting period or benefit period and the length of time before you can claim a disability benefit. Then, you’ll want to review the premiums. If the premium is too high, the waiting period until the tax offset kicks in may be too long. You don’t want to overpay on a monthly premium if it won’t benefit you in the long run.
Last, you should take a look at referrals and reviews. While you hopefully won’t need workers’ compensation, short-term disability insurance, or a partial disability claim, in the event that you’re out of work you want to partner with disability insurers that have a good reputation. If you’re still struggling to choose a plan, you can compare income protection insurance with iSelect. It’s the smartest way to review plans and find the one that fits your unique needs.
The hidden tax benefits can be a major asset to individuals across the country. You simply need to know how to leverage them to your advantage.
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