It won’t happen to me….. or will it?
It’s risk. And with cars, we realise that there is a considerable probability that we’ll meet with misfortune at least once in our lifetimes. Few drivers can claim never being involved in some sort of a collision at least once in their driving lifetime.
So why are we more complacent about our health and incomes? Particularly when we’re younger. When it comes to illness, we either don’t think it’s going to affect us or we don’t want to think it will. We hope that if we don’t think about it, or talk about it, then it won’t happen.
Unfortunately, the statistics are not in our favour….
In 2009, the risk of developing cancer1 before the age of 85 years was 1 in 2 in men, and 1 in 3 in women. The statistics are more worrying, when you realise that cancer rates are increasing. The only good news is that mortality rates for cancer have fallen, but this can still mean an extended period of illness where you will be unable to work with a lot of bills to pay.
Income protection insurance is essential and should not be overlooked. It will provide you and your family with peace of mind if at some point in time, you are unable to work because of illness or injury.
When considering the amount of income protection insurance you need, you should take into account mortgage payments and any other debts, as well as commitments you have providing for any dependent children and maintenance of other assets. The amount of insurance is then calculated as a proportion of how much of your salary you want to insure. In many cases, standard income protection provides cover for about three quarters of your salary should an injury or illness stop you from working.
Income protection insurance is available in either stepped or level premiums. Stepped premiums are less expensive, early on, but the cost increases over time, with age. They differ from level premiums, which generally stay the same, but will differ depending on how old you are when you take out the insurance. Level premiums might be more expensive to begin with, however will be more cost effective than stepped premiums in the long term.
In the end, when it comes to risk, it’s best to think of the probability of something happening multiplied by the cost to you if it does. And, by that measure, eight months off work is going to cost you a whole lot more than a minor traffic incident.
References:
- http://canceraustralia.gov.au/affected-cancer/what-cancer/cancer-australia-statistics
General Advice Warning
Any advice in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters.
