Receive 75% of your income if you can't work due to major illness or injury
Income protection provides a regular monthly payment to replace your income if you if you are unable to work due to serious illness or injury. This amount may include any commissions, bonuses or fringe benefits that you are is able to receive.
This payment provides essential financial support to you and your family so that you can keep on top of everyday expenses and short and long term repayments. This may include food, petrol, education fees, credit card debt, mortgage payments and everyday bills.
Likelihood of actually needing income protection over working life?
- One in three Australian's are diagnosed with cancer before the age of 75¹
- Over 60% of Australian's will be disabled for period over one month during their working life with 25% being disabled for longer than three months²
- Over 2.6 million Australian's under the age of 65 have suffered a physical disability³
- Yes - Premium payments are generally tax deductible
- An experienced consultant will help you assess your situation to help you find a suitable option at the right price
- Cover can be paid until age 65
Learn more about income protection insurance or enter your details in the form below to receive a no-obligation quote today.
Apply over the phone with these direct insurers
Please note that the list of products in the table above may not be the complete list of income cover products that the insurance consultants that lifeinsurancefinder.com.au works with may have access to. Products are arranged in alphabetical order and are not rated in anyway.
|What payment do I receive?||Provides you with a lump sum payment in the event of death or if diagnosed with a terminal illness with less than 12 months to live.||Provides an ongoing benefit (usually paid monthly) if insured is unable to work due to sickness or injury.|
|How old can I be to take out cover?||You can generally apply for cover until age 80 (next birthday) though some insurers cap maximum age at 75 or 70.||You can generally apply for cover until age 64 (next birthday) though some insurers cap this at age 60.|
|When does my cover end?||Policy can usually be held until age 99.||Policy can usually be held till age 65. Some policies will allow an extension of cover to age 70.|
|What do I use the payment for?||Provide financial benefit to those that are financially dependent on you so that they may cover any outstanding debt and current and future living expenses.||Cover everyday living expenses, ongoing repayments and any rehabilitation costs as you recover from a serious illness or injury.|
There are three types of this insurance available in Australia:
- Policies that are issued by life insurance companies.
- Will provide coverage for up to 75% of policyholders income though some policies will cover up to 80%.
- Policy cannot be cancelled by the insurer as long as the policyholder continues to pay their premiums or have failed to disclose any relevant information at time of application that may impact whether or not the insurer provides cover.
- Provider is unable to adjust terms of policy once it has been taken out.
- Offers more comprehensive range of benefits and features to other types of income cover.
- Policies usually taken out by employers on behalf of their employees.
- Offered to members of group super funds.
- Offers coverage of up to 75% of employees income.
- Cover provided is usually quite basic. Will not take into consideration unique features relevant to the policyholder.
- Simplified and more affordable form of cover for accidental injury, disability and death of insured person.
- Can provide either a lump-sum benefit or ongoing payment if you suffer a serious accident/disability and are unable to work. Ongoing benefit payment is generally up to 75% of your income from 2 years to age 65.
- Some policies will provide additional benefits for rehabilitation expenses
When will I qualify for a payment for Income Protection?
One of the most important steps of comparing policies is finding out when you will actually be received. Providers will class disabilities as either total or partial and temporary and permanent. The definition of total disablement will vary among insurance providers but most will use the following characteristics to approve a benefit payment:
- You suffer a serious accident or illness.
- You are unable to work due to suffering a serious accident or illness.
- You suffer a drop in income following your serious accident or illness.
This is where it can get confusing...in this definition of "unable to work" or "disablement", life insurance companies then use these different definitions of disability;
Duties Based Disability
- You are unable to perform one or more important duties in your role at work because you have suffered an illness or injury.
- Such duties may include manual work, supervision, desk work, meeting with clients or presentations.
Income Based Disability
- You have suffered a reduction in your income of 20% or greater because of an accident or illness.
Hours Based Disability
Means you are unable to perform the duties of your own occupation a certain number of hours per week (usually 10 hours) after suffering a serious accident or illness.
How much will I be paid?
A key factor that must be considered when taking out income cover that will determine how much you will be paid is whether to take out an agreed value or an indemnity value income protection policy.
You are insured for the amount of income you are earning at the time of application.
- To apply you will need to provide financial documents to your insurer, but you won't need to produce this documentation again if you make a claim.
- You will know what you will be paid regardless of your income at claim time.
Monthly benefit amount will then remain the same, regardless of fluctuations in your income over the policy period.
Who does Agreed Value suit?
This option is ideal if you are a self-employed workers or the nature of your work means that your income fluctuates frequently.
- Indemnity value will pay you for what you say you earn at the time you complete an application.
- You will need to verify your income when you claim.
- If your salary has decreased since you took out cover, your benefit will be reduced to reflect this.
Who does this Indemnity Value suit?
Indemnity value is generally a good option if you are not a self-employed worker or concerned about how your income may change in the future.
What payments are recognised as income by insurance companies?
- Pre-tax remuneration paid by employer which includes salary, fees and fringe benefits of the previous financial year.
- This will include superannuation contributions made by employer.
- This will also include commissions and bonuses paid by employer.
- Income generated due to the workers own exertion, less expenses that have been occurred through previous financial year.
What are the different cover features to look out for on policies?
- Total disablement benefit. You are paid the monthly benefit if you meet your policies definition of total disablement. You will be paid your benefit at the end of the waiting period until the end of the benefit period.
- Partial disability benefit. You will be paid the monthly partial disability benefit if you meet the definition of partial disability.
- Benefit indexation. Each year your insured monthly benefit will increase to keep pace with inflation.
- Premium waiver. You will not have to pay your premium if you are eligible to receive the monthly benefit.
- Rehabilitation expenses cover. Your insurer will pay for the cost of you to participate in an approved rehabilitation course if necessary for your recovery.
- Recurrent benefit. Your insurer will pay a benefit without a waiting period if after a specified period of time at work (usually about 12 months) you suffer the same or a related disability from a previous claim.
- Death benefit. You will be paid a lump sum benefit of a multiple of your insured monthly benefit if you pass away before the policy expires.
- Worldwide protection. You will be covered 24 hours a day, 7 days a week anywhere in the world.
- Needlestick injury benefit. Benefit paid if you become infected with HIV, AIDS, Hepatitis A or Hepatitis C as a result of a splash or needlestick injury that has occurred while performing the normal duties of your occupation. This benefit is normally only offered to medical practitioners.
- Cosmetic or elective surgery benefit. Total Disablement benefit paid if you becomes totally disabled as a result of cosmetic surgery, other elective surgery or as a result of surgery to transplant an organ from your body into the body of another person.
- Specified injury benefit. You will be paid the insured monthly benefit in advance without a waiting period if you suffer an injury listed in your policy.
- Bed confinement benefit. You will be paid a portion of your monthly benefit if you are confined to a bed and require the attendance of a full-time nurse.
- Accommodation benefit. You will be reimbursed for accommodation costs of an immediate family member if you become totally disabled and they travel more than 250km to see you.
- Family care benefit. Benefit will be paid if at the end of the waiting period a family members income is reduced as a result of looking after you while totally disabled.
- Overseas assistance benefit. Benefit paid to help cover the costs of transporting the you back to Australia if you are travelling overseas and become totally disabled for more than a specified period of time (usually 3 months).
- Day 1 accident benefit. In the event of an accident you can be paid the benefit of your income protection policy from day 1. Watch out for policies that will require you to be injured for a certain period before backdating the benefit.
- Claim escalation benefit. If your claim has been paid for more than a specified period, your benefit payment will be increased by the CPI increase.
- Lump sum payment. Receive a lump-sum payment as oppose to a monthly payment if you satisfy the companies definition of total disablement.
- Child care benefit. Receive a benefit payment if you are unable to work and your child is dependent on you for everyday needs.
- Retirement optimiser. Cover a portion of your monthly income so that your superannuation fund can continue to grow while you are under an income protection claim.
- Business expenses. Cover fixed expenses of your business if you are a self-employed worker.
- Increasing claims option. This is a paid option that increases the monthly benefit you receive over time by an agreed percentage (often 5% a year) or in line with annual CPI (inflation) increases. The Increasing Claims option is suited to those whose Income Protection policy pays a monthly benefit of longer than two years and who are not sure if the amount they would receive in the event of a loss of income would be sufficient for their needs after future inflation has reduced its value. Naturally, a benefit such as the Increasing Claims option has the potential to cost an insurer more money in the long run, so the cost is passed on to the insured in the form of a higher initial premium. However some Australian life insurance companies have recently started offering the Increasing Claims option as an inclusion in their Income Protection policies.
Protecting your income is a serious business and you want to make sure the policy you are paying for is going to protect you in the way you need. Therefore, make sure you ask your insurer a few key questions when comparing policies, such as:
- What is and isn't covered?
- How much will be paid after a claim?
- Exactly how much will the premiums be now?
- Will the premiums go up in the future, and by how much?
- Are the premiums indexed linked? i.e. will they keep pace with inflation?
- What waiting periods are offered?
- What benefit periods are offered?
- Is a benefit paid to your dependents if you pass away?
Key features to look out for in your policy
As you can see, there is a lot to consider when taking out income protection insurance, and following are a few simple tips to help you navigate your options, as well as a heads up on a few common traps to watch out for:
- Ask for all the details. Don't be afraid to ask question after question of your insurer until you're sure you've got all the information. This means knowing exactly what is and isn't covered, how much your benefit amount will be, and what your premiums will be now and into the future.
- Keep up with inflation. You can look for a policy which has index linked premiums and benefits, so that you know that your benefit amount will always keep up with inflation costs.
- Look for a non-cancellable policy. A non-cancellable policy means that your insurer won't reassess your health or circumstances each time you renew your policy, so you won't be refused cover or have a premium loading added. You can also take out a policy with guaranteed future insurability so that you can increase your level of cover without your application needing to go back to the underwriter.
- The affects of other income. Be aware that offset clauses can allow your insurer to reduce your benefit payout if you are receiving income from another source, such as sick pay from an employer or Centrelink benefits.
- Know the conditions of insurance through your super. When you take out income protection insurance through your super, the policy is between the trustee of the fund and the insurer. Therefore, you need to make sure that both the trustee and the insurer know who your nominated beneficiaries are so the benefits go where they are needed.
- Make sure you're happy with the waiting period and benefit period. The waiting period is the time you have to wait before you receive your benefit payout after a successful claim. The waiting period you choose will depend on how much you have in savings, and how long you can survive financially on other benefits such as sick leave. The benefit period is the length of time you receive the benefit for, whether it is for two months, two years or until retirement.
- Own occupation or any occupation. Make sure you know whether you will be expected to return to any job you are able to perform after an illness or injury, or if you can continue to receive a benefit until you are able to return to your own occupation.
- Understand the terms and conditions. As boring and time consuming as it is to read the fine print of an insurance policy, you want to make sure you understand all of the terms, inclusions, exclusions and conditions of your policy, so that you know you have the coverage you want and need. You don't want to be paying premiums for a policy, only to find out at the time of a claim that you're not eligible for benefits.
How much does income protection cost?
What you pay for income protection is based on a number of factors used by insurers to determine the level of risk you carry. These include
- Age: Premiums will increase with age because you are more likely to be susceptible to medical conditions.
- Your gender: Women are generally considered to be more susceptible to pre-existing medical conditions such as heart problems and pregnancy complications.
- Whether you smoke: You may pay as much as 50% more for income protection insurance if you are a smoker. You can have your premiums changed to reflect non-smoker status if you have not smoked for 24 months.
- Pre-existing medical conditions you have: An insurer will need to know the nature of your condition and any current treatment you are currently receiving. There are conditions that will be excluded automatically and others that you may receive cover for if more information is provided.
- Your occupation and how dangerous it is: This will also depend on the actual duties carried out on your occupation and their perceived level of risk.
- Lifestyle factors: Potentially dangerous hobbies such as dirt bike riding or hang-gliding may result in an increase of the premium.
- The waiting period you choose: A shorter waiting period will result in a higher premium.
- How often you pay your premium: Paying your premium annually as oppose to monthly will usually bring a discount.
How can I get cheap income protection that still provides enough cover?
While it’s important to ensure you have adequate cover when you take out Income Protection Insurance, there are still ways you can save money and reduce the cost of your premium.
- You can choose a longer waiting period such as 60 or 90 days before your benefit will start to be paid
- You can opt for a shorter benefit period (the length of time your claim will be paid out for)
- You can choose to be paid only up until age 60 instead of 65
- Take out a joint policy with your partner and receive a multi-policy discount
- Pre-pay your benefits up to 12 months to receive tax deduction for the current financial year, while receiving the benefit for the next financial year
- You can reduce the overall cost of Income Protection by combining it with other benefits such as TPD cover in a life insurance package
- Already got cover? It could be worth reviewing your current cover to see if there is a more suitable option available to you
How do stepped and level premiums work? What's right for you?
When you take out a life insurance or income protection policy, you have the option to structure your premium repayments as either stepped or level.
- Stepped premiums - Stepped premiums will increase over time in line with your age. They are a more affordable option at the start of your policy but increase steadily overtime...particularly once you have reached 40 years of age.
- Level premiums - Level premiums will start out higher than stepped but will remain the same for the life of the policy. Generally level premiums will end up being more affordable in the long run.
So what type of premium should I choose for my situation?
Stepped premiums can be a good option if you are looking for a cost-effective option in the early years of your policy if you are on a tighter budget for cover. It's also more suitable if you are likely to change your policy in the future.
Level premiums could be a better choice if you are confident that your financial situation won't see too much change in the years ahead and that you are likely to stay with the same policy.
How do waiting periods work?
The waiting period is the period between the time you make the claim and are unable to work and the time you receive your benefit payout.
You can usually choose a waiting period of 14, 30, 60, 90 days, 1 year or 2 years
The shorter waiting periods usually correlate to a higher premium, as you are asking the insurer to pay your benefits sooner, however, if you have savings which can help you make ends meet for a few weeks or months, or sick leave you can use, you may want to opt for a longer waiting period to make some savings each month. In other cases, your insurer may also include an accident benefit, where the waiting period is waived if you are unable to work due to an accident.
Typical payment waiting period payment cycle:
|Day One||Claim lodged by policyholder following onset of disability under attention of certified medical practitioner. Policyholder stops work.|
|Day Thirty||Waiting period stops.|
|Day Sixty||First benefit payment given to policyholder.|
How do benefit periods work?
When you apply for coverage you will also be able to choose how long you want to receive the benefit payout for. Often you can choose from a benefit period of one, two or five years for example, or you can choose to receive your benefit up to a certain age, such as 60 or 65 years old. Again, the benefit period you choose can affect the cost of your premiums, as the longer the benefit period, the higher the premium.
|Benefit Period||Renewal to Policy Anniversary Preceding Age|
|To Age 60||60|
|To Age 65||65|
|To Age 70||65|
Superannuation funds have provided additional life insurance cover to members for many years and can be an affordable option for members. However, it is important to remember that income protection insurance through superannuation will often only offer the minimum level of coverage to the policyholder and will not allow much room to tailor the policy towards their specific needs.
It is crucial for buyers to understand both disadvantages and advantages of income protection through superannuation when considering this option.
What are the benefits and drawbacks of income protection through superannuation
Of course there are some important benefits to consider when looking at the option of income protection through your super:
- Greater security at claims time. When you make an insurance claim it can feel like you're one tiny individual against a giant company, however, when you make a claim through your super, you are backed by the superannuation fund acting on your behalf.
- Income insurance can be more affordable through super. When your super fund protects you with income insurance, it is doing so through a group policy. This means that because they are accessing wholesale rates, the insurance is cheaper because you are not assessed on your individual circumstances and risk factors.
- Automatic acceptance. As a group policy, you are not required to answer any questions or take a medical exam. Even if you are a smoker you will pay the same rate as a non smoker. Under automatic acceptance you can be insured for as much as $20,000 a month.
- You don't pay for your income protection insurance up front. When you have cover through your super, the premiums are paid from your retirement funds, so you don't have any costs to cover now. Of course this is also the downside of insurance through Super as you are digging into your retirement funds
- Assessed as group insurance. Income protection through your super is also not usually assessed on your individual circumstances, and is more like group insurance, where the members of the super fund are assessed as a whole. This can also mean that when it comes time to make a claim, you have the full might of a large superannuation fund behind you for support.
- Unrestricted occupations. If you work in a particularly dangerous job, you may find that some insurers won't want to cover you, however, with the group cover through your superannuation, there is no restriction on occupations.
- You may not have cover anyway. While income protection insurance through your super fund does come with some restrictions, very few Australians have any sort of income protection anyway. Therefore, being covered through your super gives you protection without you having to even think, remember or research it. This can be of particular advantage to young singles or couples, who don't bother with income protection insurance because they think they are invincible and they don't have dependents anyway. However, you are forgetting that your biggest asset is your ability to earn an income, and that should be protected.
- Cost effective premium payments. When you pay for your income insurance through your super you are doing so with your contributions which have been taxed at the super contribution rate of 15%. However, if you take out a separate policy and pay for the premiums with your post tax earnings, you could have been taxed at a rate as high as 45%.
- Concessional contribution gap: Super contributions that are used to fund cover will be included in the concessional contributions cap
- Complex claims process: If you need to make a claim on your income protection insurance which is held through your super, you not only need to satisfy the insurer of the legitimacy of your claim, but also the trustee of your super fund. This is because you are not paid the benefit directly, instead the insurance benefit amount is paid to the trustee and you then have to meet a condition of release to receive the funds.
- Reduced benefit period: Some funds will cap the benefit period to 2 or 5 years.
- Limited range of benefits and options: These policies may only include the bare benefits to policyholders, leaving them unprotected under certain events.
- Cessation of work: To make a successful claim you will also need to meet the definition of temporary incapacity, which means you must be unable to work. Therefore, you are unlikely to be able to make a successfully claim if you are suffering from a partial disability.
- Tax on premiums: Premiums are only tax-deductible if you are self-employed or less than 10 percent of your income is from your employer.
- Continue private cover: If you choose to change super funds for any reason, you will need to check whether you can continue your policy in a private capacity. You will want to continue with your insurance cover, because if you have to reapply, you will be older and may be considered a higher risk, and will therefore have to pay higher premiums.
- Your retirement can be funding your insurance. It may seem cost effective to pay for your income security through your super fund, because you don't miss the premiums coming out of your income. However, the premiums can be coming out of your income insurance, as some super funds will use your retirement funds to pay your insurance premiums. Therefore, you are protected in your working life, but your nest egg for retirement is being reduced without you even realising. Making the minimum contributions to super isn't enough for most people to fund the kind of life they want in retirement anyway, so imagine how much your lifestyle is going to be reduced when not even 9% is being contributed.
It is important to note that each super income protection policy is different and the range of benefits and features may vary greatly policy to policy. Consider your personal situation when deciding if this type of policy is the right for you or whether you may require a more comprehensive income protection policy outside your super.
In this case your income and in turn your benefit amount, are assessed at the time you make a claim. Therefore, when you make a claim you will also need to provide financial documents, so if you income has reduced since you applied for the policy, your benefit will also be reduced, however, if your income has increased, your benefit will too. An indemnity policy can also often be around 20% cheaper in premiums than an agreed value policy, and can be ideal if you are in a steady job, where you receive regular pay raises and bonuses.
While there are variables within your control which will affect the cost and coverage of your income protection, such as your budget, your lifestyle and the extras you want and choose to add, there are a number of factors outside your control which determine the type of coverage you have from income protection insurance. You can't change your age or your family's medical history, though you can change your occupation – if you decide to change your career one day.
Your occupation can affect your income protection in a number of ways, for example:
- Your occupational level of risk at application. Your occupation will be assessed at the time you apply for income protection insurance to determine the level of risk you face in your everyday life. For example, someone who works on an oil rig is at higher risk, and will therefore pay higher premiums, than someone who works in an office, or in their own business from home.
- The definition of your inability to work. You take out income protection so that you can be assured that if you're injured or ill and unable to work, you'll continue to receive a portion of your income. However, the definition of your inability to work differs between policies and providers.
- Your ability to work in any occupation. On the other hand however, some income protection policies will not continue paying a benefit if you can return to any work. Therefore, if you are the injured carpenter who can't return to your own occupation, but you can get a desk job, you will be expected to take any job you can, and your benefit will not continue.
- The demands of your occupation. Whether you take out income protection insurance which covers you for returning to your own occupation, or being able to return to any work, depends on your current occupation. For example, while someone with a manual job may be able to return to work in any occupation behind a desk, if you currently work in an office job and you are injured so significantly that you can't carry on your own occupation, there is little chance of finding any other occupation you will be able to do either.
How is income protection different to WorkCover?
Workcover is a nationwide initiative where all employers pay the government a premium in case one of their employees is injured at work. The employer can then make a claim and WorkCover will payout compensation and other benefits – but only if the injury occurred at work.
WorkCover should only be viewed as a minimum insurance cover.
While all Australian employees are covered under WorkCover, that doesn't make income protection insurance obsolete. Workcover should only be viewed as a minimum insurance cover, as potential benefits are not always guaranteed as WorkCover covers. See the table below for how the two cover types are different;
- Provides an ongoing benefit payment of 75% of the your income paid monthly if you suffer a serious illness or injury
- Will cover injury and illness that occurs both at work and outside of the workplace
- Provides additional benefit payments to cover rehabilitation expenses
- You can choose for your benefit can be paid for 2 years, 5 years or to age 65
- You are generally entitled to compensation if you suffer an injury, disease, illness or psychological injury through the course of your work
- You may be entitled to compensation if through the course of your work, a pre-existing condition reoccurs
- Workers Compensation provides cover for reasonable medical, surgical and hospital care for work related injuries
- A lump sum payment may be provided for permanent impairments
- Premiums are funded by employer
- Benefit payments will usually last for a minimum of 13 weeks at 90% of the workers Annual Weekly Earnings (AWE). From 13 to 26 weeks this amount is reduced to 80% of the AWE
- You may not receive payment benefits when you are first injured which can be when you need them the most to cover medical bills, mortgage repayments and other immediate expenses
Some more questions you might have about income cover
Applying for cover
Q. Can I apply for cover if I am already ill or injured?
A. In the event of which you have become ill or injured and are unable to work and earn your income, you will not be able to obtain income protection insurance to cover you for the current situation. However, you can still apply for income protection insurance for future events.
Since your health is taken into consideration when you apply for income protection insurance, you may find that your current illness or injury may become a pre-existing condition. This means that you may have to pay higher premiums for your coverage, although this can depend on the nature of your condition or the type and level of injury.
Q. What is the difference between high risk and standard risk cover?
A. All insurance approvals and premiums are assessed based on your level of risk, and the higher your risk level, the more you have to pay in premiums, and in some cases the harder it can be to secure cover. Being classified as a standard risk means you have a low risk job, lifestyle and health factors, whereas high risk cover can be more expensive for people with riskier jobs and leisure activities.
Q. What is the minimum working hours required to receive cover?
A. This is a condition set by each insurer, requiring that you work a certain number of hours each week to be eligible for cover.
Q. Can I get Income Protection if I am 65?
Unfortunately the maximum application age for most income protection policies in Australia is 64 (age next birthday). It may still be worth speaking with an insurance consultant about other insurance options that would be worth considering for your situation.
Q. Can I get Income Protection with immediate cover?
A. If you know what you are looking for in a policy and are keen to get cover in place straight away, you may wish to take out cover with a direct insurer. Cover can generally be put in place online or over the phone and on the same day provided you meet the providers entry requirements and no additional information is required.
Q. What is a benefit period?
A. The maximum length of time your policy will pay your income if you are unable to work. Typical benefit periods are two years, five years or 'to age 65', and the longer the benefit period, the higher the premium.
Q. How do income protection insurers define disability?
A. Each insurer will have their own specific definition, but in most cases you can be classified with a duties based disability where you are unable to perform the core tasks of your job, income based disability where your income is reduced because of you disability, or hours based disability where the hours you are able to work are reduced because of your disability.
Q. Can I get an Income Protection benefit for more than 75% of my current income?
A. In general, most income protection insurance providers will offer to cover your average salary of up to 75% at most. However, you may find other insurers that may offer additional cover in excess of up to 15%.
It is important to note that the additional amount must be used as a superannuation contribution. This means, you will receive the 75% benefit amount and the remainder will be paid into your super fund. Therefore, it is unlikely that you will find insurers who offer to cover 100% of your income, as there should be an incentive for you to return to the workforce once you have recovered.
Q. How much will I get?
A. Policies will usually pay out up to 75% of your regular gross income.
Q. Am I covered for redundancy?
Income protection insurance generally doesn't provide cover for redundancy. There are a number of general insurance providers that do provide cover for redundancy in Australia.
Q. When will I get paid?
A. Waiting periods (The time you must be unable to work before you start receiving payout income) range from 14 days to two years, the shorter the waiting period, the higher the premium. The cause of your sickness or injury does not need to be work-related.
Q, What is a benefit period?
The maximum length of time your policy will pay your income if you are unable to work. Typical benefit periods are two years, five years or 'to age 65', and the longer the benefit period, the higher the premium.
Q. Will Income Protection pay my salary during pregnancy?
No. Income protection will not provide any benefit payment during pregnancy. There are a number of insurers that will let you waive your premium during pregnancy.
Q. Does my age affect the premium I have to pay?
A. Generally speaking, the older you are, the more likely you are to suffer illness, therefore the premium you pay will be higher. Smoking is also seen as an added level of risk and usually sees your premium rise.
Q. What is the difference between stepped and level premiums?
A. A stepped premium is one which starts out as very affordable, and increases each year as you get older, while a level premium stays the same though out your policy, only increasing to keep in line with inflation.
Q. What does 'insurable monthly earnings' mean?
A. The monthly income that you can insure under income protection insurance will consist of a number of different components and often these will vary between insurance providers. Your insurable monthly income is the earnings that you get every month from your primary occupation and by your own personal efforts. It is important to read through the PDS or check with your insurance provider if you have any doubts on which parts of your earnings are considered to be insurable. Your total remuneration package often include:
- Regular commissions
- Regular bonuses
- Fringe benefits
- Payments for overtime, and
- Superannuation contributions
Insurable monthly income does not include:
- All types of income that you will continue to earn even if you are unable to work
- Other unearned income, such as dividends, interest, rental income, or proceeds from sale of assets
- Income from your other occupations, other than your main occupation
- Ongoing trailing commission or royalties
Q. Will my occupation affect how much I have to pay for a policy?
A. Premiums can be based on the type of occupation the person has and the perceived level of risk. A manual or blue-collar worker such as a miner might be required to pay a higher premium compared to an office worker, who is considered less risky.
Ready to receive a quote for cover?
As stated before it is crucial for anyone considering taking out Income Protection Insurance to assess their own needs and how these needs may change into the future. With so many different policies available on the Australian market, each with variations suitable for each buyer, seeking the advice of a financial adviser can make the process a lot less stressful and time consuming. Make an enquiry in the form above to receive a preliminary quote and to be contacted by an insurance adviser to discuss your situation and appropriate insurance solutions.
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¹ AIHW (2008) Cancer in Australia: an overview 2008, Cancer series no. 46, Cat. no. CAN 42, Canberra
² Fabrizio, E (2007) Australia & NZ Disability Income Experience www.actuaries.org/IAAHS/Colloquia/Cape_Town/Walker_-_Income_protection.pdf
³ AIHW (2008) Australia’s health 2008, Cat. no. AUS 99, Canberra