Do I need income protection?

Key takeaways

  • You need income protection if you earn a regular income from a job that supports your lifestyle. 
  • Lump sum disability cover can be less effective in covering your ongoing income needs. 
  • Self-employed people and business owners with no annual leave and sick leave should consider income protection. 

Anyone who actively earns an income
without which their standard of living would drop dramatically needs to protect their income.  

You may have cover through a lump sum disability policy, but depending on your circumstances, it may be better to protect your income through an income protection policy.  

If you are self-employed or a small business owner, with the ability to provide a steady income, but have not yet built up a good savings base, income protection can be very valuable because: 

  • You are unlikely to enjoy paid-for sick leave or annual leave. 
  • You may have a family and/or other dependants who rely on your income. 
  • You may have debt such as a home loan that you need to repay even if you can't work. 

Consider your budget and the expenses you would need to meet if you were disabled and unable to work, including savings towards your retirement or your children’s education. 

If you have any lump sum disability cover, that will settle debts such as your home loan, you could exclude those expenses. 

Consider the support you would enjoy from your family but try to avoid burdening them should something happen to you.