Best Income Protection Insurance
One of the most commonly asked questions is ‘What’s the best income protection insurance?‘ Because income protection insurance is such a complex product, the answer itself is fairly detailed. The first important thing to realize is that there’s no single best IPI policy, that’s because everybody has different needs and circumstances.
Best Income Protection Insurance Australia
As we said, there is no single best policy, what you really need to do is to pair your unique situation with an income protection insurance provider. Before doing so it’s important to ask yourself a couple of important questions:
- How much cover do I need per month?
- How long can I afford to defer before receiving payment?
Answering these questions can be quite difficult. To determine how much cover you need per month you need to sit down and make a detailed budget of all of your incoming income and outgoing expenses. Let’s use a hypothetical scenario to make things a bit easier to understand.
Hypothetical Best Income Protection Insurance Policy
Billy has an income of $50,000 per year, which works out to be approximately $4,167 per month. Each month she needs to make a mortgage repayment of $1,000 and a car repayment of $325. All of her other expenses (petrol, food, electricity, gas, water, rates, entertainment miscellaneous) come out to $1,200 per month. Billy’s monthly expenses are $2,525, because income protection insurance is meant to be an income replacement Billy needs to get covered for at least $2,525 per month (which is approximately 60.50% of her regular income).
Billy has been very responsible with her financial planning and has an emergency cash fund which has six months of income in it. This means that Billy can afford to have a fairly long deferment period on any income protection policy she chooses.
By answering these two simple questions we are able to assertain two important facts, this lets us drill down on the best policy for her.
Fact #1: Billy needs cover for at least $2,525 p/m or 60.50% of her current monthly income
Fact #2: Billy needs a deferment period of 6 months or less
Cheap Income Protection Insurance
It should go without saying but the cheapest IPI policy is very rarely the best option. Cheaper policies tend to have longer deferment periods, more out clauses (things which will make you ineligible to receive payment if you do become sick or injured). [best income protection insurance] 110 [best income protection insurance australia] 58 [cheap income protection insurance] 36 [cheapest income protection insurance] 22