Hello Fellow Investors,
We have been asked on many occasions to explain the difference between life insurance and income protection insurance.
The good news is that life and income insurance are almost exactly what they sound like – and both can be important in protecting your lifestyle and family. Let’s dig a little deeper into what each of them is, and when you might need them.
What is Income Protection Insurance?
Income protection insurance is designed to replace a significant portion of your regular income (typically up to 70%) if you’re unable to work – for example, due to illness or injury.
This type of cover ensures that you can continue to meet your financial obligations, when you’re not receiving a regular paycheck or when your sick leave entitlements have been exhausted. Income protection pays to help maintain your lifestyle by covering essential living expenses, such as rent or mortgage repayments, utility bills, groceries, and other day-to-day costs. By providing a steady stream of income during challenging times, income protection helps reduce financial stress and allows you to focus on your recovery, without compromising your standard of living.
An Explanation of Life Insurance
Life insurance is designed to provide a lump sum payment to your nominated beneficiaries in the event of your death.
This type of financial support is typically used to ensure that your surviving partner, children, or other dependents are not left in a vulnerable position should you pass away. The life insurance payout helps to cover a wide range of expenses, including mortgage repayments, everyday living costs, education fees and outstanding debts.
By securing life insurance, you’re helping to provide long-term financial stability and peace of mind for your loved ones, ensuring they can maintain their lifestyle and meet future needs even in your absence.
Income Protection vs Life Insurance
The world of income protection policies and life insurance products can be quite complex to navigate, which is where a financial planner can assist. We assess your situation and are able to guide you to the right sort of insurance products to provide the best cover for your needs.
If you’d like to learn more about the difference between income protection and life insurance, or have other questions about how these, and other types of cover (like Total and Permanent Disability aka TPD, or Trauma Insurance) can fit into your financial plan, feel free to schedule a meeting with us.
Joshua Napier
Associate Financial Planner