Many Australians are just a few paychecks away from being unable to meet their ongoing obligations. If you suddenly become unable to work due to illness or an injury, the financial repercussions can be just as devastating as the illness or injury itself. Income protection insurance will provide you with regular payments, helping you to meet your ongoing obligations when these disasters hit home.

In addition to being able to receive regular payments equal to up to 75 percent of your income, you can also opt for an income protection policy that also continues to contribute to your superannuation fund when you become unable to work. You can choose to purchase a policy that replaces a lower percentage of your income, and if you already have significant assets you could draw against, or are already close to retirement age, you may wish to consider saving money on your monthly premium and purchasing income protection insurance for a lesser percentage of your income.

In most cases, income protection premiums are tax-deductible. Some plans also will offer a benefit that increases with inflation, so that if you are disabled for a long period of time, your payments will increase just as your regular paycheck would. How long the payout continues will also vary, and the payment period you choose will also affect your premium. Some policies have payouts that continue only for a certain number of years, while others will provide regular payments to you for as long as you are unable to work, until you reach retirement age. The latter, while slightly more expensive, affords the greatest amount of cover, delivering protection in case of permanent disability. It should be noted too, that income protection insurance will not diminish as a result of any other payments made by a separate health insurance policy. Your health insurance is meant to pay your medical bills, while income protection insurance replaces your income.

Your premium will depend on a number of factors, and whatever waiting period you choose will affect your monthly payment. If you have sick leave at work, the best combination is to choose a waiting period so that your benefit does not take effect until your sick leave has been exhausted. In this manner, your income stream still continues from day one, but your monthly premium is lower. While most policies have a waiting period of at least 14 days, some contain a clause that waives the waiting period under certain circumstances, such as a heart attack or other crisis situation. Your payment may also vary depending on your occupation, and the relative risk of on-the-job injury. Your broker can help you find the best policy for your needs.