In your 30's? Here's why income protection could be useful for you.
Turning 30 doesn’t necessarily mean you’re getting old, but it does mean it’s time to start making some grown-up decisions. Now is the time when you start taking on increased responsibilities in many areas of your life, and one of the things you might be considering is whether or not you should take out some form of life insurance.
Income protection insurance provides an ongoing monthly benefit to replace your regular income when you’re unable to work due to sickness or injury. There are plenty of reasons why you should take out income protection in your 30s, so let’s take a closer look at what they are.
Compare income protection direct from these brands
How much will income protection cost me in my 30's?
We analysed the cost of income protection quotes for $3,000 of monthly income protection cover.
|Brand||Monthly premium (Non-smoker)|
|TAL Accelerated Protection||$45.82|
|AMP Flexible Lifetime Protection||$48.80|
|Asteron Life Complete||$50.98|
|BT Protection Plans||$56.82|
|AIA Priority Protection||$59.73|
|Zurich Wealth Protection||$63.11|
Quotes are an estimate taken from our quote engine and are based on a 35 year old office worker in NSW. Prices last confirmed as accurate February 2017.
Should I get income protection in my 30s?
The decision about whether to get income protection insurance in your 30s is entirely up to you. However, there are several compelling reasons why income protection at this stage of life is a good idea, including:
- You could be entering a higher income bracket. If you suffered a serious illness or injury and you could no longer rely on your income, how would you cope financially? With a higher income (and a higher reliance on that income) you will have more to lose.
- Financial peace of mind becomes a priority. The future is unpredictable and all it takes is one little accident to turn your entire life upside down. But with income protection in place, you can rest assured that you’ll be covered no matter what the future holds.
- Premiums will rise as you get older. The younger and healthier you are when you take out cover, the more affordable your policy will be. With this in mind, it’s definitely worth considering taking out income protection insurance in your 30s.
- It could be crucial if you have a business. If your business relies on your ability to work to generate an income, having this type of cover in place is essential. If you don’t have income protection insurance, an illness or injury that keeps you out of the workforce can have serious financial consequences.
Pros and cons of getting cover in your 30s
- It’s cheaper. You might be surprised at just how much cheaper it is to take out cover in your 30s than it will be in 10 years’ time. If you’re young and fit when you take out cover, you can enjoy cheaper premiums for the life of your policy.
- It provides a financial safety net. Income protection cover guarantees that an unexpected illness or injury won’t leave you in dire financial straits.
- You can support your family. Income protection insurance provides a replacement income to help you continue to provide for your family even though you’re unable to work. Instead of worrying about money, you can simply concentrate on your recovery.
- It’s tax-deductible. The premiums you pay on your income protection insurance policy are tax-deductible (unless you purchase cover through superannuation).
- You might already be covered. It’s also possible to take out income protection cover through your superannuation fund; paying for cover with your super balance may be a more tax-effective option for you.
- You may not use it. Just like with any other type of insurance, you may pay for cover you never end up using.
What factors should I consider before getting a policy at this age?
Have you just turned 30 and are unsure whether you need income protection insurance? Consider the following factors before deciding if you should take out cover:
- Job risk. Some jobs pose a higher risk of injury or illness than others. For example, working on a construction site is much more hazardous than sitting in front of a computer in an air-conditioned office all day. The more dangerous your job, the more you can benefit from the peace of mind offered by income protection. However, if you work in a high-risk job you will need to pay higher premiums, while some insurers will exclude specific occupations from cover altogether.
- Income level. Consider how much you earn each month and what that amount is as a percentage of your family’s income. If you were suddenly unable to work and your income disappeared, what sort of impact would this have on your ability to make mortgage repayments, pay bills and meet other day-to-day expenses?
- Health conditions. If you suffer from any pre-existing medical conditions, this could affect your application for cover. You must disclose these conditions during the application process and you may need to undergo medical tests or provide further information to the insurer before your application is accepted.
- Financial situation. Take some time to assess your overall financial situation. If illness or injury stopped you from working, do you have an emergency cash fund to help you get by, or perhaps lots of sick or annual leave accrued? How long would you be able to cope before the financial strain became too much?
- Family situation. You need to take into account how many loved ones you provide for. Your cover needs could vary greatly depending on whether you’re single, in a couple, have a couple of young kids or even an elderly relative to look after.
Take the time to think about where you stand financially and the type of impact a serious illness or injury would have on you and your family. This will help you decide whether you need to purchase protection and, if so, how much income cover you need. The finder.com.au income protection calculator can also help you work out the monthly benefit you will be eligible to receive.
If I do get income protection now, will I be able to hold that rate as I get older?
One of the major benefits of taking out income protection in your 30s is that if you’re in good general health, your premiums will be much lower than if you were to take out cover in your 40s or 50s. You’ll also be able to keep your premiums at this cheaper level as you get older, but only if you choose a policy that offers level premiums.
When you take out income protection insurance with level premiums, your premium is calculated based on the likelihood of you making a claim when you first take out cover and then remains the same at each policy anniversary.
Heres's Monthly premium on a mid-level policy
Quotes are based on a 35 year old male officer worker who doesn't smoke. Data last checked as correct February 2017.
Make sure you take out level premium
You premium won't stay the same on income protection policies with stepped premiums. With these policies, your premium is recalculated each year based on your age and level of risk, so premiums will increase every year as you get older.
Beware of indexing
Finally, regardless of whether you have stepped or level premiums, the cost of your policy may increase each year in line with inflation. This is known as indexing and it’s designed to ensure that the level of cover you have keeps pace with the rising cost of living in Australia.