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Income Protection Insurance

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  • TAL
  • AIA
  • MLC
  • OnePath
  • Zurich
  • ClearView
  • NEOS
  • Metlife
  • Encompass

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  • TAL
  • AIALife
  • MLC
  • OnePath
  • Zurich
  • ClearView
  • NEOS
  • Metlife
  • Encompass

Ensuring Your Financial Stability in Uncertain Times

In our constantly changing world, we can face unexpected events that can disrupt our daily routines and financial plans. These can range from unforeseen medical emergencies to sudden economic downturns, often occurring without warning. To navigate these unexpected challenges confidently, investing in financial protection measures like income protection is essential.

What is Income Protection Insurance?

If you cannot work due to sickness or an accident, income protection insurance can provide you with a monthly benefit. This policy pays up to 70% of your regular income when you’re incapacitated and can’t work beyond the waiting period specified in your policy. The benefit payment will continue until you are no longer eligible to make a claim or reach the maximum benefit period, as detailed in your policy documents.

Understanding income protection in Australia

This type of  insurance typically offers you monthly benefits, covering up to 70% of your regular income if unexpected sickness or accidents halt your ability to work. You need to note terms like the “waiting period,” which is the time you’ll wait before your monthly benefits kick in. The benefit period also defines how long you’ll receive these monthly payments. By understanding these terms, you can ensure you’re making an informed decision about your coverage.

Monthly benefit

Income protection in Australia typically offers monthly benefits that cover up to 70% of your income, or up to a certain monthly amount. When looking for quotes, comparing policies with the same benefits and waiting periods is important. You typically have the option to choose between stepped and level Premiums. 

You can insure up to 70% of your post-expense personal exertion income, including your salary, super contributions, and other allowances. However, post-October 2021 changes have seen some providers, like AIA and TAL, cap benefits at 60% under certain conditions. While many aim to insure around 70% of their salary, you can choose a lower coverage if needed.

Benefit period

This refers to the maximum amount of time you will receive your monthly benefits if you cannot work due to sickness or an accident. Insurance companies usually offer different options for this period, such as 2 years, 5 years, or until you reach the age of 65 or 70. However, certain conditions may cause this period to end earlier. For instance, your benefits will stop if your doctor declares you fit to return to work, you reach the end of your chosen benefit period, your policy expires, or you pass away.

Waiting period

After you become unable to work due to an illness or injury, you will need to wait for a specific duration before you can start claiming benefits. This duration is known as the waiting period in income protection. The waiting period can range from 14 days to 2 years, and the duration you select will impact the cost of your premium. It is important to note that the waiting period begins from the date when your doctor certifies that you are unable to work due to the specific ailment or accident. Generally, shorter waiting periods will result in higher premium costs. Once the waiting period ends, you can begin accumulating your monthly benefit.

Should I have Income Protection Insurance?

Consider income protection insurance if:

  • You are the primary breadwinner in your household.
  • You don’t have a substantial savings buffer for unexpected events.
  • You have a mortgage or property investments. Income protection can help safeguard these investments.
  • You want peace of mind knowing you can cover essential expenses during unforeseen challenges.

Benefits of income protection in Australia

Having income protection cover can help you manage your essential expenses like mortgage repayments, rent, and daily living costs. It usually covers a significant portion of your regular income, giving you and your family peace of mind by providing a financial cushion. Additionally, many policies offer added benefits such as death benefits, inflation adjustments, and provisions for recurrent disabilities.

Common built-in benefits

Optional benefits

If you’re looking to enhance your policy and get more comprehensive coverage, there are additional options available to you. These options may come at a higher premium but could be worth it for their peace of mind. It’s always a good idea to check out the relevant PDS to see all the features and benefits so you can make an informed decision.

How much income protection do I need?

When you apply for income protection, your insurance provider will calculate the premium you must pay based on several aspects. These factors include your age, gender, smoking status, occupation, the monthly benefit amount you require, the waiting period before making a claim, and the length of your benefit period. You will also be asked additional questions during the application process, which will help determine the cost of your income protection premium. All of these factors ensure that you receive the right level of coverage for your circumstances.

Compare the cost of cover

InsurerPolicy NameMonthly Premium (Males)Monthly Premium (Females)
Encompass 1Income Protection Cover$20.44$28.23
clearview 200Income Protection (IP60)$25.21$35.56
NEOSIncome Support Standard$25.31$36.63
metlife 200Income Cover$29.07$38.40
mlc 200Income Assure$31.52$43.57
aia australia2 200Income Protection CORE – Flat 70%$30.55
onepath 200Income Secure Protection$32.76$49.78
zurich 200Income Safeguard$40.73$59.07

Source: Life Insurance Direct Comparison Engine (September 2023; Premium estimates are based on a 2-year benefit period and a 30 days waiting period for a non-smoking 30-year-old male and female living in NSW earning $48,000 per year as an accounts clerk.)

Paid Policy Options

You can typically tailor your income protection policy beyond selecting the fundamental components like waiting periods and benefit periods. Choosing from various policy options allows you to personalise your coverage to meet your specific requirements and enhance your policy. 

Day 3 Accident Option

We understand that unexpected accidents can cause financial stress, especially if you have limited sick leave or resources to rely on during an absence from work. In such cases, selecting this option can be a suitable alternative. It entitles you to receive benefits equal to 1/30th of the monthly benefit for each day of total disability, in case of an accident that causes disability lasting beyond the waiting period of either 14 or 30 days. The benefits will continue until the waiting period expires or until you are no longer disabled. We hope this option provides some peace of mind during a difficult time.

Increasing Claims Benefit

This feature helps protect you from inflation by adjusting your monthly benefits to match inflation rates. If you stay on claim for over a year, your monthly benefits will automatically be adjusted to match the Consumer Price Index (CPI). This ensures that your income stays sufficient to cover your monthly expenses. 

Business Expenses

This product is designed to meet the needs of self-employed entrepreneurs, sole traders, and partnerships. It includes a business expenses option that covers ongoing fixed costs like rent, leases, and electricity. If you cannot work due to sickness or an accident, this option ensures your business can continue functioning. 

Super Guarantee Benefit Option

The Super Guarantee Benefit Option provides extra financial support to partially or totally disabled individuals. An additional benefit may be paid into their nominated super fund while eligible for contributions up to $30,000.

The benefit ends when disability benefits cease, and the amount is based on the specified or average super guarantee payments made in the 12 months before the disability, whichever is lower. It cannot be changed or cancelled and is typically paid as a concessional contribution to the complying super fund.

Booster Benefit

The Booster Benefit will be given for a maximum of 6 months when Total Disability or Partial Disability occurs. The approved amount of the chosen Booster Option is added to the monthly benefit to determine the Booster Benefit. In addition, the percentage used for calculating the Income Replacement Ratio amount is increased by 20%.

How much income protection do I need?

To determine the right amount of income protection, assess your monthly expenses and factor in future commitments, savings, and income sources. Find a balance between adequate coverage and high premiums. Consulting with a financial advisor can help, but the goal is to ensure financial security for you and your loved ones in unforeseen circumstances. Make an informed decision that aligns with your situation.

How to compare income protection policies

It’s important to find the best income protection policy that suits your specific requirements. To do so, it’s generally a good idea to compare policies from various insurers. Some factors to consider include premiums, monthly benefits, waiting periods, benefit periods, claim eligibility criteria such as the period of (Own Occupation vs Any Occupation definition, Pre-Disablement Income Definition), other built-in benefits, and exclusions on the policy.

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Frequently asked questions and answers

  • Is it worth having income protection insurance?

    In today’s unpredictable world, income protection insurance is a valuable tool to help you cope with unforeseen medical emergencies that can disrupt your daily routines and financial plans. This type of insurance provides a monthly benefit that covers up to 70% of your regular income if you become incapacitated due to illness or an accident. It’s a way to ensure your financial stability during uncertain times, especially if you’re the primary breadwinner, have significant financial obligations, or lack substantial savings.
  • What is the best income protection in Australia?

    Finding the best income protection policy is a personal matter that varies depending on one’s individual needs. It is essential to compare policies from different insurance companies and take into consideration factors such as premiums, monthly benefits, waiting periods, benefit periods, and other benefits included in the policy. It is important to review the Product Disclosure Statement (PDS) thoroughly to understand the features and benefits of each policy.
  • Does income protection cover losing your job?

    Income protection insurance is meant to offer a financial benefit to individuals who are unable to work due to sickness or injury. It does not generally cover situations where you become unemployed because of redundancy or other non-medical reasons. If job loss is a concern, it is advisable to consider other insurance types or financial products specifically designed to mitigate that risk.
  • Why do women pay more for income protection?

    Income protection cover for women is generally more expensive compared to men because statistics show that females are more likely to claim on salary protection. These high claim rates might be due to women generally lodging more mental health-related claims, as well female cancers striking earlier than male-type cancers tend to do.

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