As women change jobs more often than they did in the past – losing built up sick and annual leave as a result – it’s becoming more and more difficult to rely on such entitlements when health or other circumstances prevent you from working.
As a result, the importance of considering income insurance has become increasingly relevant, but it can be a minefield of confusion, leaving many women choosing not to bother.
Income insurance is usually referred to as either income protection, or salary continuance. In essence, it’s the insurance cover that will pay you a monthly income while you’re unable to work because you’re ill or injured.
And it’s not just working women that can reap the benefits, according to Michael Miller from MLC Advice Canberra
“Anybody who doesn’t want to have to worry about money, when they’re having a rough time with their health, should have income insurance.”
So if you’re bringing in a salary, or income from self-employment, it’s necessary to be able to replace that income once sick leave runs out.
“It’s also necessary if you’re a stay at home parent, because if you’re too unwell to fully look after the kids, you’re going to need to bring in some help while you recover,” says Michael.
But it can be confusing knowing which type of policy will suit you best.
Super fund policies are designed to be low cost but not as comprehensive.
A policy you take out individually will be more comprehensive and often give you the choice between a stepped or a level premium. A stepped premium means that as you get older, the rates for your cover get more expensive. A level premium means you’re locking in the rate from when you apply.
Women who are self-employed especially should talk to an insurance specialist about whether their policy through super is suitable for them.
And those planning to take time off to have children should also ask about how their current policy would apply.
“Many insurers offer an income protection policy that includes definitions that cover stay at home mums, but you may need to have the cover in place before you stop work.
“Stay at home parents who can’t get policies that cover their income might want to get some advice about increasing total and permanent disability (TPD) or trauma cover to fill the gap – it won’t cover it perfectly but is a good start.”
Once you do set up your insurance it’s important to review it regularly, yearly would be ideal.
Some policies will let you bump your cover without having to go through a whole new application including health checks.
“Income protection insurance really is important to your financial independence, and you should make room in your budget for it.