These are some of the most common questions we asked about income protection:
- What does income protection cover?
- How much of my income can I cover?
- What do I need to know if I am self employed?
- Under what circumstances could I claim?
- How long does it take for me to start receiving my benefit?
- Does income protection cover redundancy?
- What is better – income protection or TPD Insurance?
- How do I make a claim?
- How good are companies at paying claims?
- Did you know income protection premiums were tax deductible?
What does Income Protection Cover?
Income Protection typically covers your income if you are unable to work due to a sickness or accident.
How much of my income can I cover?
In general, income protection covers up to 75% of your income. You may be able to extend this to 85% with certain insurers with the additional 10% helping to cover mortgage repayments and super contributions.
What do I need to know if I am self employed?
Generally income protection is available to those who are self employed. If you are looking at taking out income protection, you should consider your waiting and benefit period options and what proof of income you must provide.
In order to prove your income for someone who is self employed, you will need to provide payslips, business profit and loss statements and a balance sheet.
Under what circumstances could I claim?
Generally you can claim if you suffer a sickness or accident that leaves you temporarily disabled and unable to work for longer than your waiting period. Unlike workers compensation, the injury or sickness does not have to be work related and you are covered 24/7, 365 days a year worldwide.
Circumstances in which you might claim may include a broken leg or a heart attack.
How long does it take for me to start receiving my benefit?
You will start to accrue your monthly benefit at the end of your waiting period. Your waiting period is the amount of time before your benefit period starts.
General waiting period options include:
- 14 days
- 30 days
- 60 days
- 90 Days
- 180 Days
- 1 Year
- 2 Years
Generally the longer your waiting period is, the cheaper your premiums.
Does income protection cover redundancy?
The policies we compare do not offer cover for redundancy. Select insurers may offer to cover your minimum mortgage repayments if your loan is taken out through a bank which is aligned with an insurance company. Other criteria will apply.
Which is better, total and permanent disability (TPD) or income protection insurance?
While both TPD and income protection offer cover for disability, they are two completely different types of cover.
Whereas TPD covers total and permanent disablement and pays a lump sum benefit, income protection covers total disablement and pays a monthly benefit. It is specifically designed to protect your income if you are unable to work as a result of your disability.
How do I make a claim?
To make a claim you will need to follow the below steps:
- Contact Life Insurance Direct who will organise for a claim form to be sent to you
- Fill out the claim form and return to Life Insurance Direct
- Submit a treating doctor’s report
- Submit a PBS/Medicare report
- Provide proof of income if applicable, including additional information if self employed
We have a specialist claims team who can assist you with all your claims needs and who will guide you the process.
Do insurers pay claims?
In 2013, insurers paid out over $5 billion in claims, including over $1 billion for income protection.
The leading causes for income protection claims included:
- Mental illness
Income Protection premiums are tax deductible
Did you know you can claim your income protection premiums as a tax deduction? As income protecting is income protecting in nature, the Australian Taxation Office allows you to claim the deduction, potentially saving you money.
The amount you can claim will depend on your marginal rate of tax. For example if you are earning between $80,000 and $100,000, you will be able to claim back 37c for each dollar of income protection premiums you are covered for.