Income Cover Key Facts
- Redundancy Cover is only available on some general insurance products.
- Income protection plans have other features to assist redundant workers.
Income Protection and Redundancy
Income protection provides up to 75% of someones regular income in the event that they are unable to work due to sickness or illness.
Benefit Paid for Redundancy?
Income Protection Insurance from life insurance companies does not offer a benefit payment if the policy holder is made redundant. There are some policies available that will waive the policyholders premiums if they are involuntarily unemployed for a certain period. It is also possible to have mortgage repayments covered by the insurance provider if the insured is made redundant.
There are some income protection policies available from general insurance providers that will provide some benefit payment for involuntary redundancy. These types of policies should be viewed as basic insurance cover and policy applicants should have a clear understanding of the policy exclusions before submitting their applications.
It is only natural that those who are worried about being unable to work and earn their living through no fault of their own will want to protect themselves and enjoy the peace of mind that should they find themselves in such a situation they can still get at least a portion of their income whilst they get back on their feet. With this in mind, many people in Australia consider income protection plans in order to protect themselves against the financial downfalls of illness, injury or redundancy. However, what many do not realise is that income protection cover from life insurance companies does not payout in the event of redundancy. In comparison to general insurance companies, it is actually illegal for life insurance companies to provide a benefit payment after a policyholder has been made redundant. This cover is only designed to payout in the event of sickness or injury that stop you from working and earning, which means that if you are made redundant you will not be able to claim on your cover.
Income Protection Features that Offer Assistance During Involuntary Redundancy
As stated previously, there are some policies offered from Australian providers that give policy-holders assistance under certain events.
|Unemployment Waiver||If policy has been in force continuously for a set period preceding involuntary unemployment of a certain number of consecutive working days, premium and policy fee waived for a defined number of months at a time for the period policy holder is involuntarily unemployed and registered with an approved employment agency.|
|Unemployment Benefit||If the life insured becomes involuntarily unemployed for reasons other than illness or injury, provider will pay the minimum mortgage repayments while the life insured remains unemployed for a set period of time.|
Which Australian Insurers Provide Support for redundancy on their Income Cover?
Beware of Income Protection Policies Offering Protection From Being Made Redundant
The reason why many people are under the impression that they will be able to claim on their income protection plan in the event of redundancy is because this is what they have read online. However, whilst you will read a lot about income protection plans that cover against sickness, injury and redundancy online, you will find that this is for overseas plans such as those available in the USA or the UK, where income protection cover does generally protect against involuntary redundancy in addition to sickness and injury. In Australia, this is not the case and you will only be covered against sickness and injury and not involuntary redundancy. This confusion sometimes leads to Australians taking out income protection cover and thinking that they are covered against redundancy as well, which can lead to a real shock in the event that policyholders are made redundant and then realise that they cannot make a claim.
In short, Australian income protection from life insurance companies does not cover you for things such as involuntary redundancy, having to give up work to care for someone full time, being fired, or being unable to work and earn your living for any other reason than sickness and injury. You should think of Australian income protection plans more as sickness and injury protection plans, as this is what they will actually cover.
Of course, it is still an invaluable cover to have, as none of us know if and when sickness and injury may strike, and if they are debilitating enough to stop us from working and earning a living, this could cause a huge problem in terms of finances on top of everything else. The last thing you want to be doing if you are trying to get over a debilitating illness or injury is worrying about finances and with income protection cover in place, this is one less worry for you to have to cope with, enabling you to focus on your recovery and get back on your feet.
Involuntary Redundancy Insurance from General Insurance Providers
As mentioned previously, there are a number of general insurance providers in Australia that offer a benefit payment in the event of involuntary redundancy. While this can be an appealing feature for many, it is important for applicants considering this type of policy to consider the common requirements.
- Policy must have already been in force for a defined period.
- Policyholder must prove that their redundancy was in no way related to their own performance.
- Policyholder must be continuously employed for a defined period prior to lodging a claim.
- Benefit is only paid after a defined period of time from which policyholder has been made redundant.
- Policyholder can have no stream of income during this period whatsoever, this may include part-time or casual work.
- Limit on benefit payment and benefit period. Usually about $3,000 each month for up to three months.
Despite these restrictions, these general insurance income protection insurance policies can still provide an adequate level of protection for people with certain financial needs. It is important for anyone considering these types of policies to not base their decision purely on an unemployment feature. Always consider the policy exclusions and the other features available.
Apply Online for Involuntary Redundancy Cover
As stated previously, it is essential when comparing different policies offering redundancy cover online to take the time to carefully examine the conditions for payment. Not all websites promoting the policy will feature its product disclosure statement and may only cover the key benefits. A qualified insurance consultant should clearly explain the different policy features to you and assist you throughout the application process by helping you gather and complete all the necessary paperwork and submit it on time to the insurance provider. Before applying all applicants should ask themselves the following questions;
- How much cover do I need for my situation?
- How may my situation change into the future? Consider changes to income, new financial dependents and the arrival of other financial obligations.
- Consider any benefits that you may be provided with in the event of involuntary redundancy. Would these benefits provide sufficient financial help while you look for new employment?
Who Offers Redundancy Insurance in Australia?
There are currently not many providers in Australia offering full redundancy cover in Australia though this may change with the arrival of more general insurance providers giving applicants this option.
General Insurance Providers
As stated previously, there are a number of General Insurance providers with products that will offer cover for redundancy in Australia. Virgin Money has just launched its Income Protection policy that offers an Unemployment Benefit.
Both Comminsure and OnePath/ANZ feature income protection policies that will provider cover for loans that current customers currently hold with them i.e. mortgages or personal loans.
There are also a number of insurance providers that will offer a premium waiver for involuntary redundancy to ensure you can maintain your policy during unemployment but not be weighed down by payments. This will usually only be offered for a maximum period of time.
Featured Income Protection Insurance Providers that Provides Assistance when You have been Made Redundant
|Provider||Product Name||Features that Provide Unemployment Support||Details|
|Asteron Income Protection Cover & Income Protection Plus Cover||
|If you are involuntarily unemployed, your premiums can be waived for up to six months.|
|Premium and Cover Suspension||You can apply to defer your premiums and cover for up to 12 months due to financial hardship and/or unemployment.|
|Comminsure Income Care & Income Care Plus||
Unemployment Cover Benefit
|Provides coverage for your minimum monthly loan repayments for up to three months.|
|Waiver of Premium when You are Unemployed||Your premium payments will be waived for up to three months if you are unemployed.|
|MLC Premium Waiver Insurance||Premium waiver||
Maintain your policy if you have been made redundant and your income protection premiums will be waived for 12 months, in any five-year period.
|Unemployment Benefit||Covers the minimum repayments on your loans for up to three months if you are involuntarily unemployed, with up to three claims can be made.|
|Premium Pause||When you have become unemployed, you can apply to suspend your premium payments for up to 12 months.|
|Unemployment Premium Waiver||Professional white collar workers that have become involuntarily unemployed can have their premiums waived for up to three months, with up to three claims throughout the life of the policy.|
|TAL Accelerated Protection - Income Protection Premier||Involuntary Unemployment Benefit||You can defer your cover and premiums for up to 12 months if you have become unemployed.|
|Premium Pause Benefit||Your premiums will be waived for up to three months without losing coverage during this period if you have become involuntarily unemployed.|
Conclusion: Evaluate the Terms and Conditions of Any Involuntary Redundancy Insurance Policy
When it comes to cover for involuntary redundancy, its essential that all applicants consider its true value for their situation. It is vital to have a clear understanding of all the conditions for a benefit payment. While it may provide excellent support during this period for some policyholders, others may feel that it is not worth what is being paid in premium payments.