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While some people might think that income protection insurance is only for self-employed individuals, this is not accurate. This type of insurance is just as beneficial for employees, because accidents and illnesses can happen to anyone at any time. Workers' compensation provides only limited coverage, and most employees don't have much more than a few weeks' sick leave accrued. Of course, if you have more than one job, the situation becomes more of a concern if you are injured at one workplace resulting in being unable to work at either.
Income protection insurance provides financial support to individuals who are unable to work due to illness or injury. While it is comonly thought of as a product primarily for the self-employed, it is just as important for employed individuals to have income protection insurance, regardless of whether their loss of income is due to accident or illness.
Here are a few reasons why:
Fate
Accidents and illnesses can happen to anybody at any time. You know this. No one is invincible, and even the healthiest individuals can face unforeseen health issues that prevent them from working. Statistacally, two thirds of Australians will suffer an injury or an illness that will exclude them from the workforce for 3 months or more. The vast majority of these will be related to illness, and less than 20% of injuries fall within the scope of workers compensation.
Income protection insurance can provide a safety net in case of an unexpected accident or illness, ensuring that you have the financial support you need to cover your bills and expenses while you are unable to work.
Employer benefits
Very few employees have more than a couple of weeks accrued sick leave with their employer. This is not enough to cover a long-term illness or injury. Once the sick leave runs out you may be able to access some annual leave but that may mean sacrificing future holidays. Once the employer benefits run out, you will need to depend on social security and/or your savings.
Income protection insurance can fill in the gap and provide you with the financial support you need to cover your bills and expenses while you are unable to work.
Financial dependents
If you have financial dependents and are the primary breadwinner in your household, it is especially important to have income protection insurance to ensure that your family can continue to meet their financial obligations in the event that you are unable to work due to an accident or illness.
Financial stress
Income protection insurance can help to alleviate financial stress. Losing your income due to an accident or illness can be a stressful and overwhelming experience. Income protection insurance can provide peace of mind, knowing that you have a financial safety net in place to help you get through this difficult time.
Now, let's take a look at some case studies to see the benefits of having income protection insurance as an employee.
Case Study #1:
Mike is a 40-year-old sales manager at a large corporation. He has been with the company for 10 years and has a good track record with his performance. However, he has recently been involved in a serious car accident that has left him with severe injuries.
Mike has a small amount of sick leave accumulated, but it wont be anywhere near enough to cover the length of time he will need to be out of work.
Mike could be worried about how he will pay his bills and support his family during this time but, fortunately, he has an income protection insurance policy that he pays through his employer superannuation benefits package, which covers 75% of his salary. This allows him to focus on his recovery without worrying about financial stress.
In this case, Mike's income protection insurance proved to be a valuable resource, providing him with the financial support he needed during a difficult time. Without it, he would have been left to rely on his sick leave and disability coverage, which would not have been sufficient to cover his expenses.
Case Study #2:
Samantha is a 35-year-old nurse at a local hospital. She has been working in her field for over 7 years and is the primary breadwinner for her household, supporting her husband and two children.
One weekend, while working in the garden, Samantha suffered from a severe back injury and was unable to continue working. Her employer paid her a limited amount of sick leave, but it was not enough to cover her recovery time.
Samantha was faced with the possibility of not being able to support her family financially. However, she had taken out income protection insurance on her own, which covered 75% of her salary during her recovery period. This allowed her to focus on her recovery and not have to worry about her family's financial well-being.
In this case, Samantha's income protection insurance was a crucial safety net, providing her and her family with the financial support they needed during a difficult time. Without it, she would have been faced with the burden of supporting her family on a limited amount of sick leave and disability coverage.
Case Study #3:
Tom is a 30-year-old software developer who works for a small startup company. He is the only one supporting himself and is not covered under any disability or sick leave insurance.
One day, Tom developed a severe case of pneumonia which made it impossible for him to work. He had to take an extended amount of time off work to recover. During that time, he had to rely on his savings to support himself, but he knew it would not be enough.
Tom decided to purchase income protection insurance but, because he was already off work due to his illness, he was not eligible to apply. Further, Tom was told that his current condition could make it more difficult to obtain the cover in the future.
He quickly ran out of money and didn't know how he was going to pay his bills. He had no choice but to ask his family and friends for financial help until he was back on his feet.
In this case, income protection insurance could have been a financial lifesaver, providing him with the financial support he needed during a difficult time. Without it, he lost all of his savings, maxed his credit cards and became financially indebted to those around him who helped to cover his expenses.
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As you can see, it is just as important for employed individuals to have income protection insurance as it is for self-employed individuals, especially if their loss of income is due to accident or illness.
Accidents and illnesses can happen at any time, and even if you have a stable job, your employer may not offer sufficient sick leave or disability coverage. Income protection insurance can provide a financial safety net in case of a crisis, helping to alleviate financial stress and allowing you to focus on your recovery.
Published: Wednesday, 18th Jan 2023
Author: Paige Estritori
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