- Life insurance & income protection and COVID-19 FAQ
- Income Protection Insurance
- Choosing The Best Income Protection Insurance
- Is Income Protection Insurance Tax Deductible?
- Income Protection Through Superannuation
- What Is Income Protection Insurance?
- Income Protection vs Mortgage Protection
- Income Protection – A Basic Breakdown
- MLC Income Protection
- TAL Income Protection
- CommInsure Income Protecion Insurance
- Life Insurance Products
- What is Life Insurance?
- Why Do I Need Life Insurance?
- How To Purchase Life Insurance
- Key Person Insurance
- Life Insurance vs Income Protection
- Life Insurance Glossary
- Frequently Asked Questions
- Is Life Insurance Tax Deductible?
- How Much Life Insurance Do You Need?
- AMP Life Insurance
- Best Life Insurance
- Family Life Insurance
- Income Protection & GST
- Life Insurance And Superannuation
- Life Insurance For Seniors
- MLC Life Insurance
- When Is Life Insurance Paid Out?
Income Protection Insurance vs Mortgage Protection
It’s common to reach a point in life where your financial responsibilities increase significantly. The biggest purchase most people will make is a property, and in the current strong housing market buyers are out in force across the spectrum, from first home buyers to those looking to buy an investment property. People are taking on a great deal of debt – which can put them in a precarious position. What if something happened to you and you were unable to meet your financial responsibilities?
Some people may choose to take out income protection to cover their expenses if they find themselves unable to work, while others choose mortgage protection.
What is income protection?
Income protection insurance covers your costs of living if you experience serious illness or injury that prevents you from being able to work.
So how does it work? Put simply, you pay an ongoing premium based on your income and preferences. If you’re unable to work due to illness or injury you’ll be entitled to a payment that can be used to pay your bills, mortgage repayments and other costs including education and rehabilitation.
If you compare income protection policies you’ll find a number of options. These generally include:
- Choosing a level of cover. The different levels available can meet up to 75% of your income.
- Selecting a waiting period. Waiting periods usually range from 14–120 days with a shorter waiting period generally being a bit more expensive.
- Having the freedom to select your own benefit period. Benefit periods, meaning the amount of time you would be entitled to claim if you weren’t able to work, range from a 2-year benefit to an ‘age 70’ benefit.
- Choosing between ‘standard’ and ‘plus’ contracts. While standard contracts have fewer bells and whistles, they can still provide the protection required.
- Deciding between a ‘stepped’ or ‘level’ premium. Stepped policies would usually start out cheaper in the beginning but the premiums rise as you get older. Level premiums don’t increase with age so they may seem more expensive in the beginning but in the long term can be more cost effective particularly if holding onto a policy for the long term.
It’s important to note the difference between the type of income protection fund described above and an ‘industry’ or ‘salary continuation’ fund that you may have been offered through your employer superannuation. While the income protection described here offers thorough cover, ‘salary continuation’ plans can be very basic. Even if you believe you are covered by a salary continuation plan it’s worth speaking to an iSelect consultant about your options.
What is mortgage protection?
It’s common to confuse income protection and mortgage protection insurance but they are actually quite different. Mortgage protection insurance is a benefit that exclusively covers mortgage repayments. It cannot be used for groceries, bills or expenses.
Unlike income protection insurance, you generally take out mortgage protection insurance with the lender who provides your home loan. It is usually paid in either a lump sum payment or ongoing payments.
Income protection versus mortgage protection
It’s important to consider your individual circumstances – no two situations are the same. This said, income protection is typically able to provide a greater level of financial security than mortgage protection.
It’s highly likely that you have a number of important expenses outside of your mortgage that you’d like to maintain if you were unable to work. The flexibility with income protection to use your benefit to cover a wide range of expenses is a definite bonus.
Comparing your income protection options
If you are self-employed, your needs will be very different to someone who has a salaried role with an employer. Either online or on the phone, iSelect’s consultants can help you to compare income protection policies from our range of providers and available policies.
No one ever knows what’s around the corner and it pays to have a plan in place for the unexpected.
*iSelect does not compare all income protection insurers or policies in the market. We therefore don’t compare policies offered by income protection insurers who are not our partners. We maintain an internal list of approved income protection insurance policies that our advisers compare from all of our partners. We call this our ‘Approved Product List’. We have commercial arrangements with each of the partners.
iSelect Life Pty Ltd – ABN 89 124 304 347, AFS Licence Number 331128. Any advice provided by iSelect is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice iSelect gives you, having regard to your personal situation, before acting on iSelect’s advice or purchasing any policy. You should consider iSelect’s Financial Services Guide which provides information about iSelect services and your rights as a client of iSelect. iSelect receives commission for each policy sold.
Last updated: 19/03/2020