Income Protection Insurance Australia
If you were faced with the prospect of suddenly having to stop work caused by either an injury or illness, income protection is a way to manage expenses, until such a stage that you are able to return to work. Here are the basics about income protection insurance along with what this policy cover.
1. What Is Income Protection Insurance?
Income Protection Insurance replaces a maximum of 75% of your standard income when you are no longer able to work, usually caused by injuries or illness. Typically paid out in a monthly instalment, Income Protection Insurance offers the policyholder with a way to manage most of their financial essentials while they are not able to work. This policy is especially important to the individuals that are either self-employed, small business owners or the professionals that run a business that is reliant mainly on the person’s ability to work.
2. What Does Income Protection Insurance Cover?
Depending on the policy chosen, Income Protection Insurance can cover a maximum of 75% of the policyholder’s income on a monthly basis, while they are not able to work caused from an injury or an illness regarded as serious. Yet it is important to know that certain policies come with a cap. In addition, certain policies require that the individual cannot work at all, even in a capacity that is part-time. Yet there are still many others that come with what is known as “partial disability claim definition”.
There are also exclusions that include pregnancy, injuries that have been found to be self-inflicted, the result of abusing drugs, criminal activities or war may apply. The waiting period for cover is usually 30 to 90 days while waiting periods could reach 720 days before the policyholder starts to receive their benefit. When these benefits payout, they will only pay over a set time-frame which was stipulated in the original policy documents.
3. The Benefits Of Income Protection Insurance
Research has suggested that more than 50% of Australians are unsure of whether they would have sufficient financial support should something had to happen to either their partner or themselves if they could no longer work. This is when an Income Protection Insurance policy can help.
Here are some of the main advantages linked to income protection insurance:
– Offer as much as 75% of the individuals annual income, which means they are able to manage their expenses when they are no longer able to work due to an injury or serious illness.
– The policyholder will receive a payment every month to assist with covering everyday expenses.
– There is a choice in the benefit period. These periods typically range from 3 years up to 65 years, depending on the eligibility of the individual.
– There is a choice of waiting period. Depending on the eligibility and needs of the policyholder, they are able to choose a waiting period that ranges from as little as 2 weeks up to 2 years.
– Income protection can be funded through the individual’s superannuation. This will mean that it will not affect the individual’s take-home pay.
– The premiums for income protection insurance might be eligible for tax deductions, which often makes the decision to protect one’s income more affordable as a part of their overall monthly budget.
– The right income protection insurance can provide you with peace-of-mind when you are no longer able to earn an income, by offering you a way to take care of your important financial commitments.
Tips On How To Choose The Right Policy
Income Protection Insurance is available in two types:
1. Agreed Value Insurance
This policy involves that the income-protection monthly benefit will be based on what you are earning every month backed up by proof of income when you applied for the policy. In general, your monthly benefit will be guaranteed by an insurer when you have to claim, regardless of your actual earnings before your illness or disability. For this reason, these types of policies usually cost more.
2. Indemnity Value Insurance
With this policy, the payment amount from your income protection insurance policy will be based on what you were earning just before the illness or disability which will be linked to financial evidence on the date of your claim.
Before you choose the policy type, the waiting period, and term length, it is also worth your while to consider factors like access to sick leave or annual leave pay, your financial commitments and “rainy-day” savings.
If you are interested in income protection or any other insurance requirement, we can assist you in tailoring your policy to match up to your budget and your specific needs. For an obligation-free, competitive quote, professional insurance advice or more information on how we can help you find the best Income Protection Insurance solution, please contact one of our expert consultants today!