Check existing super

Check if you already have income protection insurance through super. Most super funds offer default income protection insurance that's cheaper than buying it directly.

Use Otivo and go to the Insurance plan where you can use the optimiser to see if you've got any cover in your super.

You can increase your level of cover through your super fund if you need to, but bear in mind the premiums are deducted from your super balance (which might reduce it over time, impacting what you need for retirement).

Premiums you pay for income protection insurance held outside of super are generally tax deductible. Policies outside of super usually allow a higher amount of cover and have more features and benefits available.

You can also buy income protection insurance from:

• An insurance broker

• A financial adviser

• An insurance company

The advantages and disadvantages for common methods are summarised below.

Use comparison sites to shop around for cover that works for your needs and budget:

If you need help deciding if you need income protection insurance and how much, speak to a financial adviser.

Online

Advantages

• Can be purchased at your convenience, day or night

• No waiting time for insurance documents

• Some online providers offer chat services to answer your questions promptly, within business hours

• Potentially cheaper than other providers as you’re buying direct.

Disadvantages

• If you want to speak to a human, it will likely be time consuming and might be costly

• The onus is on you to find out the answers to your questions

• When it comes to making a claim, you have to do all of the leg work

• You need to be computer savvy

• Harder to take advantage of multi-policy discounts

• Often, policies aren’t underwritten until it comes to making a claim, when it’s too late to realise you’re not covered for something you thought you were.

Insurance Broker

Advantages

• Personalised service – the same person deals with your requests/questions

• Makes recommendations on coverage and policies based on your unique needs

• Tend to be more knowledgeable about what’s out there and who offers the best coverage for the best price

• Can help you bundle policies together for better rates

• You know exactly who you can call when you need help

• They underwrite your policy at the time of approval, so there’s less chance of a nasty shock when it comes to making a claim

Disadvantages

• They work on commission. This means they may be motivated to sell you something purely because it earns them a higher commission

• Their services come at a price.

Super fund

Advantages

• Can be cheaper than other providers due to bulk buying power of funds

• No medical examinations required to take out basic cover, and they usually include TPD and income protection insurance

• Tax-effective as payments are made from pre-tax dollars (or payments are tax deductible for the self-employed)

• Easy to manage – premiums can be deducted from super contributions or the fund balance

Disadvantages

• The amount of cover may be less than what you need, and not all types of insurance are available through your super

• As premiums are taken from super contributions, there’s less money to invest and therefore less money when it comes to retiring.