Income protection insurance isn't just for workers. It's a helpful option for high-earning executives too.
If you're earning serious money as an executive you're probably not thinking about income protection insurance. But accident and illness can affect anyone. Even high earners can find themselves short of cash when the worst happens.
High-earning executives should consider income protection insurance for two reasons:
- It can provide you with a monthly payment if you're unable to work because of illness or injury.
- As a high-income, low-risk professional you can get lower premiums and higher cover.
Read this guide and learn more about income protection for executives and how to compare policies.
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How can this page help?
- Why do high earning executives need income protection insurance?
- What types of insurance are available for high-earning executives?
- How do insurers usually classify high-earning executives?
- Which industries have had the biggest increases in average salary?
Why do high-earning executives need income protection insurance?
Executives do not face much risk of getting physically injured in the workplace, but they are still at risk of illness. Many serious conditions require long recovery periods and expensive rehabilitation. Income protection insurance can help your normal life continue while you are away from work recovering.
And a higher income usually results in a more costly lifestyle. 35% of high-earning investors with an investable asset worth $200,000 still find themselves wanting a loan to pay for unexpected expenses. Executives may find it impossible to maintain their lifestyle or pay for financial responsibilities without receiving their regular income.
35% of high earning investors with an investable asset worth $200,000 still find themselves wanting a loan to pay for unexpected expenses.
Income protection cover can also help you:
- Pay loans and debts. It's hard to make loan repayments when you cannot work because of illness or accident. With income protection you will have money to help you pay off loans and debts.
- Pay for medical expenses during recuperation. Your health insurance can only cover you for treatment. What happens once you're out of hospital? How will you fully recover if your savings are depleted? The benefits you get from income protection will help you with these expenses.
- Maintain your lifestyle. When you have income protection you don’t need to worry so much about drastic lifestyle changes because of an illness. Receiving a monthly benefit payment helps you live a similar lifestyle even when you're out of work.
What types of insurance are available for high-earning executives?
There are three levels of income protection insurance to consider. Here are the main differences:
|Policy type||Cover details|
|Accident only||An accident only policy will pay a benefit if you are unable to work due to an injury caused by an accident. It does not cover illnesses. However, the nature of an executive's work puts them at a lower risk of injury and it may be worth considering a policy that only covers illnesses|
|Basic income protection||Basic income protection policies pay up to 85% of your income if you are injured or sick and cannot work. It does not have to be a work-related event for you to make a claim.|
|Premium income protection||Premium income protection is the same as basic income protection but has a couple of extra benefits. These can include rehabilitation benefit, lump sum death benefit, bill cover benefit and loan repayment cover.|
Other than income protection insurance, executives could also consider:
- Key person insurance. Key person insurance helps cover business costs if a critical team member cannot work. An executive in a vital role might want to consider key person insurance if they would be difficult to replace should they need to stop working.
- Professional indemnity insurance. If you provide professional advice or consulting services to clients you may be liable for damages if something goes wrong. Professional indemnity insurance covers you if a client files a claim against you.
- Trauma insurance. If you’re diagnosed with a specific illness that’s defined in your policy you receive a one-off lump sum payment to cover medical costs or other expenses.
How do insurers usually classify high-earning executives?
Insurers classify workers based on the tasks they perform. Executives will typically be considered ‘professional collar’, which means they have a low risk of claiming. It also means that you will be able to cover a higher income and pay a lower premium.
To be considered professional collar, your work should be mental in nature and not require physical activity. Each insurer will also set a minimum salary and education condition for this classification as well. For example, you may need to earn more than $100,000 and have university qualifications.
|#||Profession||Salary 2015||Salary 2016||% Increase|
|1||Electoral officer; Forms designer; Knowledge manager; Lobbyist; Manager - knowledge; Museum registrar; Registrar - museum; Procurement specialist||$42,115||$53,645||27.40%|
|2||Defence force personnel - type not specified||$59,565||$72,705||22.10%|
|3||Clerk - inquiry; Enquiry clerk; Faults consultant - taking reports of faults; Inquiry clerk; Information officer||$56,557||$67,772||19.80%|
|5||Administrator - funds; Clerk - stockbroking; Funds administrator; Stockbroking clerk||$178,850||$203,050||13.50%|
|6||Financial investment manager; Manager - financial investment||$309,427||$349,252||12.90%|
|7||Horticulturist - nursery; Nurseryperson||$49,018||$55,027||12.30%|
|8||Agent - stock and station; Stock and station agent||$75,512||$84,535||11.90%|
|9||Broker - stocks; Stock exchange dealer; Stockbroker||$243,278||$271,654||11.70%|
|10||Manager - advertising; Director - advertising; Advertising director; Advertising manager||$104,566||$115,386||10.30%|
|#||Profession||Salary 2015||Salary 2016||% Increase|
|1||Manager - advertising; Director - advertising; Advertising director; Advertising manager||$74,312||$80,825||8.80%|
|2||Analyst - market research; Market research analyst||$62,468||$67,865||8.60%|
|3||Anaesthetist; Medical practitioner - specialist - anaesthetist||$246,480||$265,923||7.90%|
|4||Computer sales representative; Computing professional - sales representative; IT sales representative; Sales representative - IT||$71,417||$77,021||7.80%|
|5||Clothing designer; Designer - clothing or fashion; Fashion designer||$59,617||$64,599||8.40%|
|6||Medical officer - resident; Resident medical officer; Medical practitioner - resident medical officer||$76,916||$82,673||7.50%|
|8||Customs investigator or officer; Inspector - customs; Investigator - customs||$70,528||$75,697||7.30%|
|9||Designer - Web; Web designer||$55,193||$58,990||6.90%|
|10||Public servant - federal or state/territory - non-executive - lower||$53,448||$56,865||6.40%|
How much should a high-earning executive pay for income protection cover?
The cost of an income protection policy varies widely depending on your income and the type of job you do. The following premiums on this chart are examples only but can give you a rough idea.
*These are example quotes only for a 45-year-old male managing director who lives in NSW and doesn't smoke. Your actual quotes may vary.
How can I find the right income protection insurance as a high-earning executive?
There are several policy features executives should consider when shopping for income protection insurance:
- Maximum benefit amount. Executives earning high incomes will need a higher benefit amount than most insurers offer. Many insurers will only pay a benefit of up to $10,000 a month. Some speciality providers set the benefit maximum much higher, up to $35,000. You may need to look around for one that will match your income.
- Benefit period. Some income protection policies will only cover you until you are 60 years old. This also means that you will not be able to receive a benefit after this age. For executives nearing this age, it is worth looking for an insurer who will pay a benefit until 65 or 70 years old.
- Exclusions. Stress is one of the significant risks executives face. While there isn't much chance of suffering a physical injury, the pressure of managing organisations can cause executives to suffer stress or poor mental health. Some insurers will not cover illness related to mental conditions and stress. Executives should check the product disclosure statement on a policy to ensure they are covered if they need to take time off due to stress.
- Level or stepped premiums. Level premiums don’t change (but they are adjusted for inflation). Stepped premiums are lower in the short-term but they rise over the life of the policy. Check out our full guide to stepped and level premiums.
Income protection insurance has two kinds of cover: indemnity value and agreed value cover. Which one suits you better depends on the nature of your job.
- Indemnity Value. Under this type of policy, the amount of the benefit you receive depends on the amount of income you had just before the accident or injury.
- Agreed Value. With this type of policy changes in your income will not affect the amount of your benefit. You have to pay a higher premium but your benefit payments won't be affected by changes in your income.
If you're a high-earning executive you're likely on a stable salary and can probably take advantage of a cheaper indemnity value policy. However, if your pay goes up you'll only receive benefit payouts in line with your earlier, lower salary.
A good executive thinks strategically and always looks ahead. Having the foresight to take out an income protection policy might be one of the smartest calls you ever make.