Tax Tip Week 39 - Income Protection Insurance
Formerly known as Permanent Health Insurance (PHI), IPI is an insurance paid when a person is incapacitated to work their usual work that they are qualified to perform due to illness or accident.
Typically policies pay out around 65% of gross earnings, although this may be lower for high earners.
Some providers will allow dividend income to count towards gross earnings, but many will not. Therefore careful selection of a provider is important as generally Contractors and Freelancers take a low salary with the majority of income taken as dividends.
There may be tax savings to be made when taking out a group policy in the company name; however, in the event of a claim, the cost to the individual may outweigh any tax savings.
For further details please see our guide Income Protection Insurance.