What is Income Protection?
It pays a monthly benefit and can help cover up to 75 per cent of your salary. It is designed to help cover your salary if you are unable to work due to a sickness or accident.
What monthly benefit amount can I insure?
Generally insurers will allow you to cover up to a maximum of 75 per cent of your salary. Even if you have multiple policies, you will only ever be able to receive 75 per cent of your salary.
Is their a waiting period?
Yes, generally insurers will impose a waiting period on your policy. The waiting period will differ between insurers but generally waiting periods that are available are:
- 14 days
- 30 days
- 60 days
- 90 days
- 180 days
- 1 year
- 2 years
What is the benefit period option?
The benefit period is the amount of time you will receive your benefit for. While these will differ between insurers, generally they will offer a number of benefit period options:
- 2 years
- 5 years
- To age 65
- To age 70
What is the difference between agreed value and indemnity value policies?
Agreed value policies will generally require you to provide proof of your income at the time of your policy application. The benefit that is paid at claim time is not reduced by any fluctuations in income. This type of may be best suited to the self employed or those with varying incomes.
Indemnity value policies will generally require you to proof your income at the time of your claim. These policies may be suited to those with relatively stable income or for people who are unable to provide proof of income. These policies are generally cheaper than agreed value policies.
Does Income Protection insurance cover redundancy?
Generally, income protection insurance does not include redundancy cover and only covers you if you are unable to work due to sickness or an accident.
However select companies may offer the following options if you are made redundant or become involuntarily unemployed:
- Select insurers may offer a limited unemployment benefit which can be built into your policy, which will help cover the costs of a mortgage for a certain number of months. This limited benefit may be a daily benefit of 1/30th of your monthly benefit for the duration of your unemployment up to a certain period of time. This will generally be paid directly into your loan account and will only be offered by insurance companies who are aligned with a bank and when your home loan or mortgage is taken out through the same bank.
- If you have a home loan or mortgage through a bank which is aligned with a life insurance company, you will receive the minimum repayment on any home loans, investment home loads, business loans, personal loans and margin lending loads issues by the same bank.
- Other insurers may waive premiums on your policies during the period of unemployment for a maximum of 3 – 6 months. Companies may require you to be registered with an accredited employment agency
Am I able to take out income protection policy if I work part time?
While most policies require you to work full time hours of at least 25 – 30 hours per week, select insurers may offer cover for part time workers who work at least 3 days and a minimum of 20 hours per week.
This may be a particularly useful option for mothers or fathers working part time after being on maternity or paternity leave.
Please note that this option may only be available to certain occupation classes and with select insurers.
Am I covered while playing sport?
Generally you are fully covered when playing non-professional sport, as well as most past times your participate in.
However, it is important to be up front and honest and to fully comply with your duty of disclosure about any sports or hazardous past times you participate in at the time of your policy application, so that your adviser can find appropriate cover for you and so that your insurer is happy to cover you for that particular activity.
Sports that are generally covered include:
- Indoor Rock Climbing
Sports that may require individual consideration:
- Motor Racing
- Trail Bike Riding
- Sky Diving
- Base Jumping
- Outdoor rock climbing
Additional consideration is generally based on:
- Whether or not you are a professional
- Number of hours spent on that activity each year
- Maximum heights and speeds reached
- Locations of activity
- Any past incidents or accidents while participating in that activity.
When assessing whether or not these past times will be insured, insurers will generally choose one of the following options:
- Fully coverage for that particular past time
- Exclusion on that activity from your income protection policy; or
- A premium loading of generally 25 per cent place on that activity if you want to include the activity as part of your cover.
Generally, if you cease the activity at some stage during the policy, the premium loading can be removed.
Can I claim on my policy if I am only partial disabled?
Yes, if you have a partial disability it is possible to make a claim under the partial disability benefit. However, select insurers will generally require you to have been totally disabled during the waiting period for a certain number of days before you can make a partial disablement claim or will require you to be totally disabled at the end of the waiting period.
Select policies may allow you to go on a partial disability claim from day 1, without needing a period of total disablement.
Do I accrue my monthly benefit during the waiting period?
Generally you will not accrue any benefit during your waiting period. However, select insurers may offer a number of options which may make it possible for you to start accruing a partial benefit during the waiting period. These options may include:
Please note that while you may start to accrue a partial benefit during your waiting period, it may be up to 30 or 60 days before you receive your benefit. Generally insures pay on certain days – either fortnightly or monthly.
Will I be taxed on my monthly benefit?
Yes, generally your monthly benefit will be treated as income by the ATO and will be included as part of assessable income and taxed accordingly. However, generally your income protection premiums are tax deductible.
If you have any urgent questions, please call us on 1300 882 762 to speak to one of our advisers