Sally (24) earns $36,000 each year ($3,000 per month) and pays half the monthly rent for a unit she shares with Dan.
After a skiing accident, Sally required a knee reconstruction and was completely off her feet for three months. Also, when she returned to work, she was at 50% capacity for a further two months.
Fortunately, Sally had taken out Income Protection insurance through her super fund, where her premiums are automatically paid from her super balance.
Whereas, if Sally's insurance had been outside super and she had a cash flow crisis, she may have allowed her insurance to lapse.
With her insurance Sally received a total income of $12,750 during the five months she was disabled consisting of sick leave, salary and Income Protection benefits.
With no Income Protection insurance, total earnings would have been $6,000. Sally would have struggled to pay rent and might have had to move back home with her parents.
She also wouldn't have been able to pay her car loan or credit card bills.
Sally's Income Protection insurance covered 75% of her income ($2,250 per month). She received a benefit of $2,250 per month for two months after her initial one-month waiting period (where she was covered by sick leave).
Then, when she went back to work 2.5 days each week, she received 50% of her monthly benefit ($1,125 per month) on top of her reduced salary of $1,500 each month as a partial disability benefit under her income protection.
To make sure you are adequately protected, talk to your Mortgage Choice Financial Adviser today.
*All images and names are for illustration purposes only