In the modern world, it’s all too easy to find ourselves persuaded into taking out insurance policies we might not need, so it’s understandable to approach the subject of income protection insurance with a little scepticism. However, it is always good to delve a little deeper before writing off potentially useful policies, so let’s take a closer look at income protection insurance in Australia and whether it is something you should consider.

A basic definition of income protection insurance and how it works

In a nutshell, income protection insurance replaces the majority of your regular employment income if you’re unable to work for some legitimate reason covered by the policy. This tends to involve sickness or injury and will require official medical reports confirming the validity of the ailment. Applicants must also be:

• Aged 18-59 (certain occupations may be more severely age-limited)

• Citizen/permanent resident of Australia

• Employed or self-employed for more than 20-30 hours per week (depending on the occupation)

Be aware, the following conditions or circumstances will not be covered by a standard income protection insurance policy:

Suspension from duties – If the claimant is suspended from their duties for any reason, whether temporarily or permanently, their period of reduced income will not be covered.

Pregnancy – The list of potential side-effects here is a long one but any attributed to the pregnancy of the policyholder will invalidate payments.

Self-harm – If the insured person deliberately inflicts harm upon themselves, no cover will be provided.

Acts of war – Injuries or disabilities incurred as a result of war will not be remunerated.

Criminal activity – Any policyholder injured as a result of their participation in criminal activity will not be eligible for payment during their recovery or incarceration.

Does income protection insurance apply if I am incapacitated outside Australia?

With a typical income protection insurance policy, the holder will be entitled to payments, providing the following are true:

- The holder has returned to Australia

- The disqualifying factors above are not in evidence

- Payment is not required for more than 3 months

Conclusion: Is it worth the premium to purchase income protection insurance?

Circumstances differ from individual to individual and there is no 'catch-all' answer to be found here. What we can say for sure is that the peace of mind associated with knowing your income is guaranteed in case of sickness or injury is not to be underestimated and certainly worthy of serious consideration. If you take the plunge and research the right policy for you, we recommend you:

- Review any income protection insurance quote and associated fine print carefully. In Australia, this should include a product disclosure statement so be sure to give that due attention.

- Ask specific questions of your policy-maker on issues most likely to affect you.

- Keep documents and details in good order to make life easier should you need to make a claim.

Whether you are mining for opals in Coober Pedy or running a sports facility in Melbourne, you should give income protection insurance serious consideration.