Income Protection insurance aims to protect usually up to 75% of your income (including superannuation contributions and other benefits that you receive) in the event that you are unable to work due to accident or illness.
Income protection policies vary greatly unlike other types of personal insurance. In addition to the sum insured or monthly benefit amount, the waiting period, benefit period, type of contract (agreed amount or indemnity) and additional benefits are some of the features that need to be taken into consideration when matching your situation to a policy. Please see below for a brief description on each:
The waiting period on a policy is the time that needs to pass after the commencement of your accident or illness before you start to receive a benefit from the insurance company. This is a variable to be chosen at the time of application by you and can range from 2 weeks to 2 years.
This may reflect the period of time that you can manage because of leave, annual leave, savings etc. that you have without needing an income protection benefit stream.
The longer the waiting period, generally the less expensive the insurance premium will be.
It is important to remember that benefits are usually paid monthly in arrears and therefore if you have a waiting period of 60 days, you will need to be able to support yourself financially for 90 days.
The benefit period is the period for which you will continue to receive an income protection benefit in the event that you continue to be unable to work due to illness or accident. This is another variable that you chose and can be for a set period (i.e. 2 or 5 years) or until a set age (i.e. to age 55 or 65).
The choice of which waiting period is suitable to you will reflect your goals and objectives in applying for income protection. The longer the benefit period, generally the more expensive the premiums will be.
An agreed policy ensures that the full benefit amount is paid in the event of a successful claim whether it reflects your income at the time of claim or not. An indemnity policy will require financial checks at the time of claim and your benefit (if the claim is successful) will be based on your earnings at the time of claim – for example 75% of monies earned in 12 months before claim. An indemnity policy will be less expensive than an agreed policy, though it could potentially result in a reduced benefit being payable at the time of claim than what your policy states.
It is important to note that if financial underwriting was not completed at application stage, financial checks will be required at the time of claim regardless of whether the policy is an agreed or indemnity type.
Whether an agreed or indemnity policy is suitable to your circumstances may reflect your employment status (self employed or employee) or whether you plan to change careers in the future.
A ‘comprehensive’ policy (or sometimes referred to as an extras package) does not ensure a certain defined level of cover across products, it simply means that the policy is of a higher protection level than the same provider’s ‘basic’ policy.
In order to explain the range of costs for policies depending on whether they are ‘basic’ or ‘comprehensive’, the more ‘comprehensive’ policies may include added benefits such as the following:
You will need to read the Product Disclosure Statement (PDS) to find specific information relevant to specific income protection products.
Increasing Claims Benefit - An increasing claims benefit will ensure that an income protection benefit, once a claim has commenced will increase with CPI each year. This is important for policies with a long term benefit period (such as to age 65) to ensure that the benefit amount remains relevant to the future value of money.
Day One Accident Cover - Day One Accident Cover ensures that the waiting period is waived in the event that your disability is caused by an accident. This option is usually only available for shorter term waiting periods.
Please make an online enquiry or call us and we look forward to discuss any queries that you have and assistance that you require regarding Income Protection.
After having had my income protection, with a company based abroad, for the last 15yrs I recently decided to sort it here in Australia.(Now based here so it makes sense.)
Needless to say the thought of trying to get a similar product for a good price was a concern....
Dr S.T (BDSc)
We work with: