Insurance companies and state agencies have been urging Australian employees left and right to purchase income protection insurance policies, and current reports are presenting major media channels with mixed messages in terms of coverage. While numerous Australians are very poorly, or not at all informed on the matter, industry statistics cited by News.com.au indicate that claims are running ever higher on this segment of the insurance market. Apparently, 2011 alone saw no fewer than 34,056 claims for income protection insurance covers and their total value exceeded $1.000.000.000. Where does the truth lie? Do you actually need income protection, or is it yet another insurance fund pressure strategy, meant to wrest away more of your hard-earned dollars? Read on, to see what the experts are saying.

Income protection is mostly applied in the United Kingdomand Ireland, but it is also available in Australia, under slightly different provisions than in the two other states. The biggest boon it brings to an employee or a self-employed person’s life is the certainty that, should they fall victim to a work accident or any other type of illness or injury, they will still receive up to 75% of their salary. Certain high risk occupations, as well as self-employed individuals are held in greater importance when it comes to such policies, since those who are not lawfully employed by a company usually cannot claim Workers’ Compensation. Such insurance policies vary greatly from one provider to the next, both in terms of waiting period (i.e., for how long you need to be disabled in order to claim your premium), as well as with respect to the length of the benefit period. Industry expert Karyn Hilton, interviewed by Sophie Elseworth of News Limited says that it depends on gender, age, type of work conducted on a daily basis (desk jobs are obviously favored over manual labor) and lifestyle. While not all providers require that the applicant take a medical beforehand, smoking and other health risks can greatly affect the value of one’s premium.

AMP, for instance, will offer policies ranging from $800 and $1,200 per annum and does not hold the policy within superannuation, for policy holders without cash flow problems. As a matter of fact, since income insurance is tax deductible and often provides better contractual terms than superannuation, bank representative Dianne Charman claims the two should always be held separate. Charman recommends that anyone in debt, raising children or looking into property investment should consider income protection. Meanwhile, other providers available for comparison on Bankwest.com.au will factor in an entirely different set of criteria, which is why it is usually advisable to check with an insurance specialist before making a decision.

As with any type of insurance, income protection, too, is not mandatory, yet it is highly advisable, especially for people who like to maintain a certain lifestyle. Meanwhile, recently conducted polls by Lifewise indicate that, while 83% of the population has had their car insured, only 31% are protecting “their most valuable asset”—that is, the ability to earn an income. If you’re interested in taking out income protection insurance, the first step you need to take is make sure your superannuation does not already include it. The second, and perhaps most important step, is honestly evaluate your prospects, career level and expectations. How long can you afford to wait, before you start receiving money from your policy? A month? Two? What happens when you take a long-service or sick leave from your job? Check out these tips and more valuable information on Government portal MoneySmart.gov.au, and remember, income protection is tax deductible in most cases.