How does income protection work when you have more than one job?

Income protection insurance is designed to replace a portion of your income if you can’t work due to illness or injury. But what happens if you have two or more sources of income?

Income protection in Australia generally covers up to 70% of your income. If you have two or more jobs when you apply for your policy, insurers will usually consider your combined income when determining the cover amount. If your income fluctuates, the insurer may take an average of your income over time as an indicator of your usual earnings per month.

The income protection premiums you pay may be tax-deductible. This means you might be able to claim the cost as a deduction on your tax return. On the other hand, any benefit payments received from an income protection policy claim are usually considered part of your reportable taxable income.

Other helpful things to know

• There’s a Waiting Period before you can start receiving benefit payments. You can choose the Waiting Period when you apply for your policy, and it could range from 14 days to 90 days (or even longer) after you first become unable to work. A longer Waiting Period typically results in lower premiums compared to policies with a shorter waiting period.
• You can also choose the Benefit Period, which is how long you’ll receive payments for if you claim. This could range from 2 years to up until age 65, depending on the policy you choose. A shorter Benefit Period typically results in lower premiums compared to policies with a longer Benefit Period.
• Some income protection policies may offer additional benefits if you’re partially disabled. If you can only return to one of your jobs or all of your jobs in a reduced capacity, you might be eligible to receive a reduced benefit amount.
• Riskier professions generally attract higher premiums. If you have two jobs in different risk categories, the insurer will likely base the premium on the riskier occupation.

If you have two or more jobs and are considering income protection or have an existing policy and have taken up a second job it’s a good idea to speak with the team at ADR Wealth. I can help you understand the specific terms of your policy regarding your occupations and ensure you have the right level of coverage so you feel confident you can keep on top of your expenses no matter what happens.

Source: TAL

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it you should consider its appropriateness for you, having regard to those factors. Before making any decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement and independent financial and tax advice.