By the AIA TECE Team
Losing the ability to earn an income to fund living expenses could run down savings levels and cause financial difficulty. As an adviser, you play an integral role in helping your clients recognise the importance of income protection and help them to manage their cash flow and any potential risks. However, for many clients the decision to hold income protection insurance comes down to affordability.
But what should your clients consider when deciding on how to structure their income protection cover? When thinking about whether insurance should be held inside or outside of superannuation, it is important to note that some of the key features remain the same, such as:
- Premiums are generally tax deductible under both ownership structures
- The after-tax cost of the premiums is the same for the client under both structures, and
- Upon claim, monthly benefit payments are taxed at the client’s marginal tax rate under both structures as payments are considered ‘ordinary income’.