If Your Income Stopped Tomorrow, How Long Would You Last?
For most people, your ability to earn an income is your greatest financial asset.
1 in 5 Australians will be unable to work for 3+months due to illness or injury before the age of 65 (Financial Services Council, 2024)
Your income pays the mortgage, rent, groceries, school fees, bills, holidays and savings. But what would happen if an illness or injury meant you couldn’t work for an extended period?
This is where Income Protection Insurance can play an important role.
Income Protection is designed to provide you with a regular income if you are unable to work due to illness or injury, helping you maintain your lifestyle and meet your financial commitments while you recover.
Why consider Income Protection?
1. Your income pays for almost everything
Most financial commitments don’t stop when you can’t work. Your mortgage, rent, car repayments, utilities and household expenses continue regardless of whether you’re receiving a salary.
2. Savings, Sick Leave and Annual Leave may not last as long as require
Having an emergency fund is important, but a prolonged illness or injury can quickly turn a healthy savings balance into a depleted one. Having Leave entitlements may not be sufficient to cover your main asset, YOU.
3. Government benefits may not replace your income
Government support may be available in some circumstances, but it generally isn’t designed to replace a professional or high-income earner’s normal salary.
5. It protects your financial goals
An extended period away from work can affect more than your day-to-day expenses. It can also mean reduced superannuation contributions, less money available to invest, difficulty paying down debt and potentially delaying longer-term financial goals.
A simple example: earning $150,000 a year
That’s approximately:
• $12,500 per month before tax
• $2,885 per week before tax
Now imagine you suffer an illness or injury and are unable to work for 12 months or even longer.
Without adequate Income Protection, you lose a significant portion of your normal income while financial expenses continue.
If an Income Protection policy provided a benefit of 70% of their pre-disability income, the potential benefit could be approximately:
$150,000 × 70% = $105,000 per year
or approximately:
$8,750 per month before any applicable policy adjustments or tax considerations.
That could provide a substantial financial buffer while you focus on recovery rather than worrying about how the mortgage and household bills will be paid.
It’s not just about protecting your salary
Income Protection is really about protecting the lifestyle and financial security that your income provides.
You have spent years building a career, buying a home, raising a family or accumulating investments, your future earning capacity could be worth millions of dollars over your working life. You insure your car and home but your biggest asset is your Income.
The important thing to remember
Income Protection policies and premiums can differ significantly depending on your age, wage and profession. Waiting periods, benefit periods, benefit amounts, definitions of disability, exclusions and policy terms are important factors to consider.
The right level of cover depends on your individual circumstances, income, expenses, existing insurance, leave entitlements and financial objectives.
There are many ways to structure your income protection policy and should be tailored to your needs and objectives.
If your income stopped tomorrow, how long could your current savings and investments support your lifestyle? Contact us to have an insurance needs analysis completed and provide you with peace of mind.
Contact our team today or call us on 03 8910 8940 book a review.
Michael Stratton
Managing Director – Financial Adviser
Your Financial Future Pty Ltd
This article contains general information only and does not constitute financial or tax advice. It does not take into account your personal objectives, financial situation, or needs. Please contact Blackfox Financial Group for advice tailored to your circumstances.
Your Financial Future Pty Ltd is a Corporate Authorised Representative of Lifespan Financial Planning Pty Ltd AFSL No. 229892 ABN 23 065 921 735.