Month: November 2017

To understand if your income protection insurance premiums are tax-deductible, you need to know if your policy is held within your super fund and the specifics of what the policy covers.

Are Income Protection Premiums for Policies Within Superannuation Funds Deductible?

If your income protection premiums are deducted from your super contributions, then they are not personally tax deductible.

However, as insurers receive a 15% tax rebate due to the premiums being a deductible expense to the fund, most insurers pass on this 15% saving to you if you pay your premiums annually as a rollover.

Are Income Protection Premiums for Policies Outside of Superannuation Funds Deductible?

Yes!

Generally premiums that you pay towards an income protection insurance policy outside of your super fund are deductible.

It should be noted, however, that if any portion of the income protection policy covers capital as opposed to income, only the portion of the premium dedicated to your income will be deductible.

Income protection insurance held outside of super can also often be bundled with other kinds of insurance.  If your policy includes benefits such as the TPD Lump Sum Option, a portion of your premium will not be deductible.

Always check with your insurance provider to find out about your exact coverage.

Will My Income Protection Insurance Benefits Be Taxed?

Yes.

While your premiums are deductible when being paid outside your super fund, the payments you receive if you ever claim are taxable.  You must declare them much as you would regular income from an employer.

Some benefits, such as receiving a Trauma Benefit will not be treated as income, and as such it will not be assessable as taxable income.

If your policy is held within a super fund, the trustee of the fund will generally apply withholding tax to the benefit.  However, this can vary between funds, so you should seek clarification.

Again, always check with your insurance provider to find out about your exact coverage.

What Else Should I Consider When Purchasing Income Protection Insurance?

You should always carefully analyse the features of each policy that you are considering.  There are much more important aspects to income protection insurance than the deductibility of the premiums.

The cost of your premiums, the level of coverage, whether you can get your income protection insurance as part of a package or as a stand-alone product, and if there are any industry or association discounts you may be eligible for are just a few key considerations.

Learn More About Income Protection Insurance

If you want to know more about whether purchasing income protection insurance is right for you and your family, have a chat with a professional insurance adviser. They have all the information you need to get the coverage that’s right for you at their fingertips.

Get in touch with a friendly adviser from Cover Australia on 1300 366 817 or simply click ‘Get a Quote’ to start comparing what’s on offer from Australia’s top insurers today.

 

Everyone, including those who are unemployed, need life insurance to protect their loved ones.

Whether you’re employed or not, you have financial responsibilities that can’t be ignored. Life insurance is one of those responsibilities – and it’s actually more important for those out of work than those in work to maintain their policy.

Below we’ve answered the most common life insurance questions those who find themselves out of work have.

 

Q: I’m considering cancelling my life insurance policy to cut back on expenses. Is this a good idea?

Not necessarily. Life insurance policies do not have a savings component, so unless you opt out of your policy within the 30 day cooling off period, cancelling will mean that you lose all of the premiums you’ve paid so far.

Unemployed people actually have a greater need to protect their family’s finances than their employed counterparts. This is because, if money is already tight, then if something were to happen to you the results would be even more financially devastating for your family.

If you think you can’t pay your premiums while out of work, imagine how much harder it will be for your family to pay for funeral expenses, mortgage repayments and bills during financially hard times.

 

Q: What can I do if I really can’t afford my life insurance premiums while I’m unemployed?

The last thing you want to do is abandon a policy that you’ve been paying for years or even decades.

Many insurers are happy to help you through hard times by allowing up to a 3-month freeze period where you’re not required to pay your premiums.

You can use this period to look for work, catch up on other bills that are due and get by with one less financial stress to consider!

Whilst it is obviously crucial to not allow your insurances to put yourself under financial strain, it is important to weigh up all options before making any changes.

 

Q: Are there other ways I can reduce my premiums while I look for work?

There are several ways you can lower the cost of your life insurance while you’re unemployed. These include:

• Reducing your level of cover
• Comparing your current provider’s rates with the rates of other, more competitive providers
• Adopting a healthier lifestyle by losing weight, quitting smoking or cutting back on your alcohol consumption
• Changing to a life insurance policy that requires a medical as opposed to a non-medical policy which will almost always compensate for the lack of personal information with higher premiums

Find out more ways to reduce your premiums here.

 

Q: Can I get approved for a new life insurance policy while I’m unemployed?

Sometimes life insurance providers are less likely to approve policy applications made by unemployed people. Life insurance will typically be limited to a certain level while you are looking for work while disability covers will not be offered based on your own occupation.

This is a rare scenario, however, and most life insurance providers will consider more than a few factors before determining if you’re eligible to take out a policy, including:

• How steady your history of employment is
• How long you’ve been unemployed
• How employable your skills are
• How actively you are pursuing employment
• Your credit history
• Your assets
• Your savings
• The level of coverage you’re applying for

If you have apprehensions about whether you’ll be accepted given your personal circumstances, it’s a good idea to apply for a lower level of coverage and then increase this level of cover when you commence working again.

 

Q: Will cancelling my life insurance affect my ability to reapply down the track?

It is possible that cancelling now can affect your ability to get the same rate later down the track – especially if you’ve held your policy since you were young.

This is because the older you get, the higher the premiums you’ll be charged. So, if you’ve locked in a great rate when you’re young, it’s in your financial best interest to keep that policy when you’re older. This typically refers to policies that have a ‘level premium’.