Income Protection Insurance
Income Protection Insurance Explained
Why do I need Income Protection Insurance?
Income Protection insurance is one of the most important insurances that many of us overlook. We insure our cars, homes, even our lives but forget to insure our most important asset – our income! To often Australians think that either our savings, holiday pay or government assistance will aid us if the worst were to happen and we were unable to work for an extended period of time. The fact of the matter is if you were to have a major accident or be diagnosed with a mid – long term illness you would be unable to work for many months on end and the bills won’t stop coming. In fact you will most likely have higher expenses due to medical bills attributing to your costs.
Income Protection Insurance is an effective and easy back up plan in the circumstance where you cant work for an extended period of time. The policy will cover up to 90% of your income enabling you recover without having the added stress of how you can cover your daily living expenses and medical bills.
Many reliable insurance companies offer varying forms of Income Protection policies. There are some providers that offer accidental and illness only components and most offer the combined package. As a general rule on most policies you will have to serve a waiting period of 30 – 120 days if you are unable to work. This limits claims whereby the recovery period of the condition is covered under employer sickness benefits.
How do I apply for Income Protection Insurance?
You can apply directly with many Life Insurance providers for Income Protection or source the product through your broker. In fact Income Protection is one of the first insurances many brokers will look at when assessing your financial needs.
Similar to purchasing many general insurance products (ie car and home and contents insurance) you can go directly to the insurer by simply contacting their respective contact centre and make an application over the phone.
Most providers will offer options of coverage from 20 – 90% of your standard income giving you the option of having some level of coverage to fit into your budget. Depending on your circumstances the premiums are generally tax deductible and the pay out is subject to taxation treatments.
You will most probably be asked questions pertaining to your previous medical health, or in some instances be required to take a medical in your application for Income Protection insurance. Income Protection is not a guaranteed acceptance product and depending on your medical history you may be declined for the product or attract a loading (a higher premium to reflect the higher risk to the insurer). Be mindful that insurers have access to your medical history in event of a claim and will most probably deny a claim if deliberate non-disclosure of pre-existing medical conditions is discovered from Medicare records.
Smokers generally attract higher rates than non-smokers.
What features does a Income Protection policy offer?
- Payout amounts of up to 90% of your income
- Differing options of accident and illness only coverage.
- A lot of companies offer a fixed premium offer whereby your coverage amount decreases over time as opposed to your premiums increasing.
- Most policies have tax deductible premiums
- Relatively easy application processes