Your most Valuable Asset...
Sophie works full-time and earns a salary of $95,000 pa. She owns a home worth
$550,000 and has a mortgage of $380,000. If she’s unable to work due to illness or
injury, she wants to be able to meet her living expenses and mortgage repayments.
Sophie does not have significant savings to fall back on.
After assessing her goals and financial situation, her financial adviser recommends
she take out Income Protection insurance to cover 75% of her monthly income. Shortly
after taking out the insurance, Sophie is involved in a bad car accident and is unable
to work for seven months.
Because Sophie had Income Protection insurance, she receives the full benefit of
$5,937 per month for six months after her initial one month waiting period (where
she’s covered by sick leave from her employer). As a result, Sophie receives a total
income of $43,539 during the seven months she’s off work – consisting of a combination
of sick leave and Income Protection benefits.
If Sophie had not taken out Income Protection insurance, she would only have received
a sick leave payment of $7,917 and would have struggled to meet her living expenses,
mortgage repayments and out-of-pocket medical costs.
This case study highlights the importance of speaking to a financial adviser about
protecting your income in the event of illness or injury. A financial adviser can also address a
range of potential issues and identify other suitable protection strategies.