Who will pay your bills if you are too sick to work? Income protection is one of the three pillars of wealth protection, along with life insurance and critical illness cover. If injury or illness prevents you from working, income protection is key to maintaining financial stability for expat families in Asia.
The three pillars of wealth protection
A trio of insurance policies can work together to protect your wealth and safeguard your family’s financial future. They are:
Life insurance: Provides a lump sum payout to your family if you pass away, ensuring they remain financially secure.
Critical illness cover: Offers a financial cushion in the form of a lump-sum payment upon diagnosis of a qualifying serious illness. This payout is designed to help cover medical costs, lost income or other financial burdens that arise during recovery.
Income protection: Replaces a portion of your salary if illness or injury prevents you from working, providing ongoing financial support to keep your household financially stable until you recover.
In this article, we take a closer look at income protection.
Income protection insurance
Income protection insurance is an insurance policy designed to replace lost income in the event of a long-term illness, injury/accident. If the insured is not able to work due to illness or injury, they receive a percentage of their gross salary or take-home pay monthly.
These benefits are received until they recover and can work again, or until retirement. This is an important part of a quality and secure income protection, making sure that the criteria for returning to work isn’t just any work; it’s usually into a position in line with their previous employment, skills or qualifications. As an example, a lawyer who is severely injured would not be expected to return to menial work and lose benefits. Usually, the payments are tax-free.
Whereas expats may be eligible for state benefits back home, this is rarely the case when you live abroad. Even when state-funded statutory sick pay or incapacity benefits are offered, they are usually way below average earnings and insufficient to maintain anything more than a very basic standard of living.
If you become unable to work due to illness or injury, regular payments from your income protection policy will enable you to cover your ongoing living expenses including payment of your mortgage, school fees and maintain your lifestyle.
The benefits of income protection
Receive a percentage of your salary while you are unable to work
- Alleviates financial stress if you are seriously ill, so you can concentrate on recovery
- Cover for physical and mental health conditions
- Receive payments until you retire
- Peace of mind for your family
- Portable policies wherever you are in the world
Key considerations when choosing income protection
Waiting period: Policies often have a delay before payouts begin, usually between 30 days and several months. Consider how long you could manage financially before needing support.
Benefit period: Some policies provide income replacement for a set number of years, while others continue until retirement.
Coverage percentage: Policies typically cover between 50% and 75% of pre-tax earnings.
Exclusions: Certain medical conditions or pre-existing illnesses might not be covered.
The cost of income protection
Premiums vary based on age, occupation, health status and desired coverage level. It’s worth comparing policies and shopping around to find the policy that best suits your family. Your Infinity financial adviser can help with this. An indexed policy will ensure that payouts keep pace with inflation.
Some expats will have group income protection via their employer. Check if it is included in your benefits package, and whether it is sufficient for your needs. It may be a good idea to top-up and your financial consultant can advise.
Do I really need income protection?
As with many types of insurance, income protection can seem expendable, until you really need it. Perhaps some statistics will persuade you that it’s a good idea!
- A US study concluded that a young person turning 20 in 2024 had a 23% chance of becoming disabled before retirement age.
- 44% of Americans don’t have the means to pay a $1000 unexpected bill
- Globally, one in two people will develop a mental health disorder in their lifetime
- The global incidence of early-onset cancer increased by 79% between 1990 and 2019.
Of course, you may be lucky and live healthily and happily for the duration of your career, fingers crossed. But there are no guarantees. If you want a rock-solid wealth protection plan, income protection is a necessary addition to life insurance and critical illness cover.
Income protection: a case-study
Aged just 38 and in excellent health, Geraldine, a business development executive, was diagnosed with breast cancer in 2024. Two surgeries were required to remove the cancer followed by a lengthy programme of chemotherapy and then daily radiotherapy sessions for a month. Geraldine was unable to work for the 14-month duration of her treatment.
Find the right income protection policy for your family
The best place to start in finding income protection to protect your wealth and family is to speak to your Infinity financial adviser. They can discuss the policies available to you, help you compare prices and cover and find the best one suited to your needs and budget.
It’s worth noting that income protection insurance can be difficult to obtain in certain countries due to regulatory restrictions, compliance requirements or geopolitical factors. If this is the case, your adviser can suggest alternative savings and investment products to protect your wealth and ensure that a diagnosis or accident won’t derail your finances.
Get in touch for a free consultation on wealth protection and safeguard your family’s financial future today.
A leading provider of expat financial services and wealth management services across Asia.
