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Income Protection Insurance is designed to protect you, should you be unable to work due to a sickness or accident and will generally pay up to 75 percent of your monthly salary for a specified period. It can help lessen the financial impact on your family should you suffer an accident or sickness.

• What you need to consider
• Policy Types Available
• Waiting Period
• Benefit Period
• Monthly Benefit
• Premium Types
• Built-in Benefits
• Additional Options

What you need to consider

When you are comparing quotes, it is important to consider the effect the following variables will have on the cost of your premium:

• Your age
• Your gender
• Your insurable income
• Your smoking status
• Your occupation

The cost of your premium will also be determined by the options you choose in your policy.

Generally, each of the following will have a number of selections for you to choose from:

1. Waiting Period
2. Monthly Benefits
3. Benefit Periods
4. Policy Types
5. Premium Types
6. Built in benefits
7. Additional options

Policy Types Available:

There are generally three main policy types to choose from:

Indemnity value:

In an indemnity policy type, the monthly amount payable will generally be the lesser of:

• The monthly amount insured shown in the policy schedule
• 75% of the insured’s pre–claim earnings

In an indemnity value policy, you will be required to provide proof of income either at the time of policy application or at claim time.

Agreed value:

Your monthly benefit is the agreed value at the time of your policy application and is based upon your income at that particular time. You will generally be required to provide proof of your income at this stage.

Select insurers have recently begun offering a third policy type:

Guaranteed agreed value:

This works essentially the same way as an agreed value policy, but select insurers will convert your agreed value policy to guaranteed agreed value upon presenting a proof of income.

Waiting Period:

The waiting period is the amount of time you will be required to wait before you can receive your benefit. Waiting period options will differ between insurers but you will generally have a choice of 14, 30, 60, 90, 180 days or 1 year or 2 years.

The length of the waiting period will affect your policy premium. Policies with longer waiting periods will generally have less expensive premiums while policies with shorter waiting period will have more expensive premiums.

Benefit Period:

The benefit period is the maximum period during which the insurer will pay a monthly benefit. While they will differ between insurers, you will generally have a choice of benefit period of either 2, 5 years or 6 years to age 55, 60, 65 or 70.

When going through a policy comparison, it is important to note that generally the longer the benefit period is, the more expensive the premium due to the increase in liability to the life insurance company.

Monthly Benefit:

The monthly benefit is the maximum amount you will receive each month while on claim. Generally, you will be paid up to 75% of your monthly salary. The monthly benefit is unique to income protection insurance in that the benefit is paid monthly rather than in one lump sum as with the majority of other types of personal insurance.

The monthly benefit will expire at the earliest of:

• The end of the benefit period
• The expiry of the policy
• The insured being able to return to work
• The insured’s death

Premium Types for comparison:

There are generally three premium types offered:

• While Stepped Premiums generally start off cheaper than level premiums, stepped premiums generally increase as you get older.

• More affordable in the long run, Level Premiums do not increase with your age each year but do start off more expensive than stepped premiums. Level premiums will also convert to stepped premiums at age 65 or 70 depending on the option selected.

• Select insurers offer Optimum/Hybrid Premiums which begin as stepped but will convert to level premiums once the stepped premiums become more expensive thainsun the level premiums. Generally the premiums will remain unaffected by age until 65 or 70 when as per normal policy guidelines, they will convert to step premiums. This is generally paid for option.

It is important to note the impact each premium type will have on the cost of your premiums when you are going through an income protection insurance quote and comparison.

Built-in benefits:

A number of built in benefits will generally be available with your policy. Insurers will generally differ on which benefits are included as part of their standard policies and which are paid for additional options, which will affect your quote.

Standard built in benefits may include:

• Waiver of premium option
• No claim benefit
• Total/partial disablement benefit
• Rehabilitation expenses benefit
• Specified injury benefit

Please consult the relevant PDS to see which built in benefits are included in that policy so that you choose the most appropriate policy for you.

Additional options

You can further customize your policy with additional policy options. Some insurers may include some of these options or benefits in their standard income protection policies and it is always important to check. It is important to consult the Product Disclosure Statement before deciding on which policy and which additional policy options are more suitable to you.

Additional options which may affect your quote include:

• Specified injury benefit
• Day 1 Accident cover
• Increasing Claims Option
• Total Disablement Booster Payment
• Needlestick cover
• Bed confinement option
• Lump sum payment option
• Business expenses
• Mental health discount option

Generally the more additional paid for options you include in your policy, the more expensive your policy will be.

At Life Insurance Direct, we make comparing quotes as easy and user friendly as possible. We compare 12 of Australia’s biggest life insurance companies (and hundreds of policy options to find the income protection policy that suits you.

To conduct an income protection quote comparison enter your details at the top of the page or call us on 1300 135 205.