Life Shield - Your Life, Your Protection, Personal Insurance

Income Protection - How to increase your ability to make a successful claim?

Ensure that your Income Protection policy meets your needs

Income Protection is offered by most life insurance companies and is the broadest and most flexible type of Personal Insurance with many features that need to be moulded to suit your situation and goals.
We at Life Shield recommend that you check your policy or have an adviser check it for you. Some issues that may be relevant to your situation are:

  • Blood borne diseases: These days, the majority of policies will pay a benefit in the event of needle stick injuries causing Hepatitis B or C or HIV. In these events it is highly likely that you will not be allowed to practice even though physically you may be able to. Older Income Protection policies will exclude these conditions.
  • Waiting Period: The waiting period is the amount of time that needs to pass since the start of disability before the insurance company will start to pay a monthly benefit – this can be from 2 weeks to 2 years. The longer the waiting period, the cheaper your cover will be. If you can afford to extend the waiting period as you only want cover for longer term disability, you can greatly reduce the cost of your Income Protection insurance.
  • Benefit Period: The benefit period is the maximum amount of time that an Income Protection benefit will be payable – this can be a set period (e.g. 2 or 5 years) or until age 65 or even 70. The longer the benefit period the more expensive your cover will cost.
  • Waiting period qualification: Each Income Protection contract states that you may need to be ‘totally disabled’ for a period of time before you become eligible for a partial monthly benefit. The least amount of time is preferable as this will greatly increase your ability to make a claim in the event of less serious illnesses or injuries. Some older policies require you to be totally disabled for the whole of the waiting period whereas some policies do not require you to be totally disabled at all.
  • Additional benefits: Income Protection policies often include additional benefits such as ‘specified illness’ or ‘specified injury benefit’. These enable the client make a claim for a specified amount in the event of suffering one of the listed conditions even if they do not affect your ability to work.

Have your Income Protection policies reviewed regularly to ensure that it remains up to date

Due to the increasingly open marketplace, Income Protection policies have improved greatly over recent years. It may be worthwhile to have your policy reviewed to ensure that your insurance contract has been updated in line with the market.

Ensure that your policy includes a definition of disability that is relevant to your situation

Australian Income Protection policies commonly use three distinct definitions to assess degrees of disability:

  • Duties based – where you are unable to perform important duties of your occupation. This is the most common basis (especially for older policies).
  • Hours based – where your working hours are reduced in your occupation.
  • Income based – where you suffer a loss of income due to disability.
Policy Definition What it means….
Duties Based You will be paid a full benefit if you are unable to perform income producing duties of your occupation and due to this you are not working. A reduced Income Protection benefit will be payable if you continue to be in paid work.
Hours based You will be paid a full benefit in the event that you can not work in your own occupation for more than 10 hours per week. You will be paid a reduced Income Protection benefit if you work in your own or any occupation for more than 10 hours.
Income based You will be judged as disabled if, due to illness or injury, you suffer a reduction in earned income of 20% or greater. If you continue to work and earn income, the income protection benefit that you receive will be reduced.

The majority of Income Protection policies use the duties based definition however there are now policies that include all three definitions and enable the client to choose which definition they are best suited to at claim time.

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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)
Newman, WA.

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