Income Protection Benefit Period

When reviewing income protection policies, you will need to decide how long you want your monthly benefit to be paid for. Depending on the insurer, you can generally choose a specific amount of years, 2 o 5, or up to a certain age, for example up to you age 65 or 70.

Published February 22, 2021

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Income protection covers a portion of your salary if you cannot work due to illness or an injury. The benefits from this kind of cover is potentially paid for a length of time; known as the income protection benefit period.

What is an income protection benefit period?

This is the maximum period that your monthly benefit will be paid out if you’re unable to return to work because of an accident or illness. This benefit typically pays up to 75% of your regular income. Generally, this benefit payment continues until you return to work. Your doctor confirms you can return to work, or reach your maximum period, as stated in your policy documents.

How long is a typical benefit period?

Generally, the length varies according to the level of cover you choose and your insurer. However, it’s most common to find that insurers offer short or long term periods. Short term periods typically provide cover for two or five years. On the other hand, long-term periods are usually up to a specific age.

Each option has its own set of pros and cons, and it’s important to compare all of the options available to you. This way, you’ll be able to find the right cover to suit your requirements.

Long vs Short benefit periods

Short-term periodsLong-term periods
Generally, the period is set between two and five years. However, some insurers may offer a period of one or six years.Long-term periods typically provide you with cover until you reach a certain age. Generally, this is up to age 65 or 70. Some insurers offer periods up to age 50 or 55.
Policies with a short-term period are ideal for providing you with cover for illness or injuries that prevent you from working for a shorter time.Typically, it provides you with a greater protection level against lessor and major illness or accidents that prevent you from returning to work for a longer time.
Monthly premiums are typically lower as the benefits won’t need to be paid for an extended period.Generally, the longer the period, the more expensive your premiums.

How does it work?

Usually, the maximum period for benefit payments begins the day after the waiting period ends. However, you’ll only receive your benefits if your doctor confirms that you are still partially or totally disabled. You’ll generally need to provide proof that you are unable to return to work under the advice of a medical professional.

Generally, you’ll continue to receive your benefits unless one of the following conditions apply:

Take note: Your policy can be cancelled or amended at any time if your insurer discovers that you have not disclosed all relevant medical information. It’s best to be as honest as possible with your insurer to ensure your policy remains active.

How to choose the best income protection payment period

Generally, there are several things that you’ll need to take into consideration when selecting the maximum period for benefits to be paid on your policy; this includes:

  • Everyday expenses: You will need to keep in mind what your everyday living expenses will be in the foreseeable future. It may also be a good idea to think about how long you’ll be able to afford to pay these expenses without earning an income.
  • Income protection through your super: If you have salary continuance through your superannuation fund, you may want to examine the amount of cover you have and your payment periods before deciding about additional income protection policies.
  • Ongoing debts: Ongoing debts like mortgage repayments, credit card repayments, and any other loans need to be paid even if you cannot work because of an injury or illness.
  • Affordability of premiums: Longer benefits are typically more expensive. You’ll need to find a balance between your budget and the period you’d like.
  • Your job: You may want to think about the risks associated with your profession. If you have a high-risk job, you may want to consider a policy with an extended period.

Are they the same as waiting periods?

No, this period typically refers to the maximum amount of time the monthly benefits will be paid to you. On the other hand, the other hand, the waiting period refers to the amount of time you’ll need to be off work before your benefits start. In contrast to compensation periods, your premiums will generally be cheaper if you choose an extended waiting period.

Income protection for specific injuries

Some insurers offer members the option to get additional cover for specific injuries. This benefit typically pays a specified lump sum amount in advance if you suffer a particular injury or illness as defined by the medical conditions in your PDS. Typically, this payment is not subject to any waiting periods. This means you’ll receive the benefit whether you’ve stayed off of work for the duration of the waiting period or not. However, this benefit is generally only offered for free by select insurers, while others offer it is a paid option.

Benefit periods for specific injury benefit

Generally, specific injuries will have the following periods; however, check your relevant PDS for more information:

Frequently asked questions and answers

  • How long should your benefit period for income protection be?

    Generally, it’s a good idea to look for the longest period for benefit payments possible, for instance, to age 56 or 70. However, you may have to reduce this based on your occupation (select insurers restrict high-risk occupation to 2 or 5 year periods, policy periods on offer or affordability.
  • What do you need to know about choosing a benefit period?

    You’ll also need to consider your current financial circumstances, including your debts, monthly expenses, and lifestyle, as this will give you a good starting point on the duration of the payment period you may want to consider.
  • Are 2 or 5 year benefit periods better?

    Typically, these are both short-term periods. To decide which option is best for your requirements, you may want to consider the total maximum benefit potentially payable. For example, 2 years x 75% of your yearly salary = x vs 5 years x 75% of your salary = 2 ½ X; therefore, the 5 year period could provide you with a far greater payout if the condition is long term.
  • Does the length of the benefit affect your premium?

    Yes, the length of your payment period will generally influence the premiums on your policy. Typically, the longer your compensation period, the more expensive your premiums. This is because extended payment periods are associated with a higher potential payout to the insurer.
  • Can you choose your own period?

    Yes, you’ll generally be able to choose between the options provided in the product disclosure statement of the policy you are considering buying the policy from, typically options are 2 years, 5 years or up to age 65 or 70
  • What happens when your income protection benefit period is over?

    Generally, when you reach the end of your payment period, your insurer will stop paying you benefits for that relevant condition. If your policy has not expired, you will typically retain the policy but no longer claim on the relevant condition. Refer to your PDS for more information.

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