Best Income Protection Insurance

How to find the best income protection insurance

Our guide provides you with step-by-step assistance in finding the best income protection insurance in Australia. Helping you invest in the best policy for your specific needs and occupational circumstances. Whether you’re employed full time, self-employed or a professional, for example, a doctor, surgeon or architect there’s generally an income protection insurance policy that may meet your requirements.

Finding the best value income protection insurance is an important step in protecting you and your family’s financial future. The best income protection policy for you is generally the one that meets all of your requirements. When you compare income protection policies, you may want to ask yourself the following:

Your ability to earn an income is often your most valuable asset. If you are unable to work because of an illness or injury it could cause a large drop in your income. Income protection insurance is typically designed to soften the blow of your lost income. Use the benefits paid to you to support your family during difficult times.

How to choose the best Income Protection Policy

Step 1 – Consider your present and short term financial situation

How much sick leave do you have?

Sick leave helps an employee when their ill or injured and needs time off to recuperate. Usually, full-time employees are provided with 10 days sick leave each year, while pro rata is determined for part-time employees based on the amount of hours they work.

Of course, if you are self-employed and or an independent contractor, you may not have any sick leave and should make sure you have money set aside in the event of sickness or injury, which brings us to our next point.

How much savings do you have?

Knowing the amount of money you’ve got saved will help you determine how soon you’ll need the benefits to start should you be unable to work due to an illness or injury.
Generally, the less savings and sick leave you have the shorter the waiting period on your income protection cover policy will need to be. 

Because you never receive any money during the waiting period you need to ensure have enough money to get you through this time. Take note that a 90 day waiting period can reduce your premiums by half compared to a 30 day waiting period.

Step 2 – Work out your monthly income requirements and your long term family obligations

Determine how much income protection need.

What is the amount of income you and your family requires to maintain the lifestyle you’re accustomed to? This is referred to as your monthly benefit and replaces part of your income. 

The best income protection policy will at least provide cover for your personal exertion income. However, you might need more than the monthly benefit provides to help you maintain your current lifestyle. Select insurers offer a number of policy options that can increase your monthly benefit. See point 3.3 for built-in and add-on features.

Determine your benefit period.

Even though there is no way for you to know how long you might one day be ill or injured, it’s important to estimate how long you’ll require the monthly benefit to continue should you have a long term sickness or accident.

Do you have any TPD / Trauma cover?

When calculating the monthly benefit or benefit period you’ll need it’s important that you review any other insurance cover you might have as this may alter your cover requirements. While neither is a substitute for income protection, you may be able to reduce the level of TPD or Trauma cover you need or alternatively the level of cover your income protection policy provides.

Generally, your monthly benefit will have an offset clause, which means that if you were to receive a lump sum pay out, for example, a workers comp claim for the same condition, your monthly benefit would be reduced by the relevant calculation as stated in the product disclosure statement. 

Typically it is reduced by 1/60th of the lump sum payout. Or if you had a second income protection or salary continuance policy that provided a monthly benefit then the max they would pay you is up to 70% of your pre-disablement income, that’s because you should never be better off disabled than able to work. Otherwise, you’ll have no motivation to return to work when you’ve recovered.

However, you can have two policies if they cover different benefit periods. For example, one policy might require a 30 day waiting period and only provide two years of income benefit; your second policy might require a two-year waiting period but will provide cover until your age 65.

Do you have any TPD / Trauma cover?

When calculating the monthly benefit or benefit period you’ll need it’s important that you review any other insurance cover you might have as this may alter your cover requirements. While neither is a substitute for income protection, you may be able to reduce the level of TPD or Trauma cover you need or alternatively the level of cover your income protection policy provides.

Generally, your monthly benefit will have an offset clause, which means that if you were to receive a lump sum pay out, for example, a workers comp claim for the same condition, your monthly benefit would be reduced by the relevant calculation as stated in the product disclosure statement. 

Typically it is reduced by 1/60th of the lump sum payout. Or if you had a second income protection or salary continuance policy that provided a monthly benefit then the max they would pay you is up to 70% of your pre-disablement income, that’s because you should never be better off disabled than able to work. Otherwise, you’ll have no motivation to return to work when you’ve recovered.

However, you can have two policies if they cover different benefit periods. For example, one policy might require a 30 day waiting period and only provide two years of income benefit; your second policy might require a two-year waiting period but will provide cover until your age 65.

Step 3. Understand the policy types, premium structures, policy options and factors that influence the cost of your cover

In the past, you generally had the option to choose between Agreed, Guaranteed Agreed and indemnity value policies. However, if you were to apply for a new income protection policy it would typically be an indemnity policy. Generally this is the cheapest type, however this is because you monthly benefit is determined by your ability to prove your “Pre Disablement Income” at claim time and your payout will be the lesser of the sum insured or 70% of your “Pre Disablement Income”, and the responsibility is on you to prove what you earned.

Factors that will influence the cost of your policy include:

Best income protection insurance for doctors

The best income protection insurance for doctors would be a policy that either includes or has the option to add Needle stick Cover and provides a monthly benefit should they be unable to perform their own occupation due to sickness or accident.

Best income protection insurance for self employed

The best income protection insurance for self-employed people are the ones you’re able to tailor to your specific circumstances and occupation. You might need a more affordable cover option with a shorter benefit period for accidents or a policy that provides more flexibility when needing to prove your level of income.

Whether employed full time, self-employed or a professional, make sure you invest in the best value income protection insurance for your specific circumstances. Contact us and let us help you find an appropriate policy to protect you and your family’s financial needs.

Recent Income Protection Awards

The Australian Financial Review (AFR) Blue Ribbon awards reviewed and awarded insurers for their income protection policies.

In 2016 Clearview Life Solutions took home the blue ribbon with their Income Protection Plus policy, paying policyholders an ongoing monthly benefit amount for as long as they remained disabled or until the expiry of their benefit period.

This year, the coveted blue ribbon went to BT’s Income Protection Plus Plan, other finalists for the 2017 award included AMP Elevate’s Income Insurance Premier Plan and TAL for their Income Protection Premier Plan.

Should Awards determine the best value income protection insurance?

No, because the determining criteria to enter such a competition and determine the winners are often not made available or clearly explained, therefore we should not use these awards as the sole determining factor in make a product decision.

Compare income protection quotes

To find the best policy for you, it’s generally a good idea to compare income protection quotes. This way you’ll be able to get an indication of how much you can expect to pay for your cover. The right income protection insurance policy is typically one that aligns with your personal circumstances and requirements.