Income protection outside of super

When you take out income protection insurance directly from an insurer or through a financial adviser, the big advantage is flexibility: you can generally tailor cover to your needs and budget, add benefits that are important to you, and your insurer may also offer shorter waiting periods and longer benefit payment periods than you can generally access through a default super fund policy. This flexibility may extend to the way you pay premiums, with many insurers offering a discount for making annual payments. Furthermore, if you have income protection outside of super, you may be able to claim the premiums paid as a tax deduction, and payments made before June 30 will generally be tax deductible in the same financial year.

Default income protection through super

Most super funds offer default income protection to their members. With this kind of insurance, premiums are deducted automatically from your super so you don’t have to find the money for payments every month. Premiums may also be lower, since super funds generally buy their policies in bulk. However, it’s important to consider your retirement needs when choosing this option, as paying for premiums from your super may impact your super balance, and if you change funds, your cover could end. Unlike income protection held outside super, these policies can be one-size-fits-all: depending on the fund, you may not have the option to customise your cover to suit your individual needs, and you may have little choice over waiting times or how long you’ll receive a benefit. Australian tax law can be complicated, so it’s important to seek advice from a qualified financial adviser or registered tax agent before making any decisions. If you’re interested in exploring income protection options tailored to your needs, I can help you find a policy that’s right for you.