Income Protection Insurance Premium Waivers

Published: July 28, 2013

Income protection insurance waivers may be offered when a client is receiving claim benefits, depending on the insurer. It can help relieve financial pressure, by lessening the impact on your budget. When money is tight, income cover can often be the first thing to slip off the monthly shopping list. But with premium waivers offered at the time of claim, you can help safeguard your financial future and potentially save thousands of dollars when you need it most.

Buy Income Protection Directly

Policy Maximum Monthly Benefit Percentage of Income Covered Benefit Period Waiting Period  
NobleOak Direct Income Protection AIA
$25,000
75%
2 years or up to age 65
30 or 90 days
Receive up to 75% of your monthly income with Income Protection Insurance. Cover essential living expenses when you’re unable to work due to an illness or injury. Consider the PDS. Issuer is NobleOak Life Limited ABN 85087648708. AFSL 247302.

Income protection insurance premium waivers explained

Premium waivers has been a feature of a few income protection insurance policies for many years. There are a select handful of insurers that offer this benefit as part of their standard policy.

Insurance premium waiver options

If you decide to purchase other policies from the same insurer (like life, trauma, and TPD insurance), ensure the policies are on the same policy schedule. Doing this further enhances the effect of the premium waiver. In the event of a claim, all premiums on other policies will also typically be waived. However before making a decision check that your insurer extends this type of premium waiver clause to other policies as not all do!

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Case Study: Tony’s income protection insurance premium waiver

Tony is 35 years old and works as a pharmacist in country Victoria. Currently his income protection insurance covers him to age 65, with a $6,250 per month benefit (30 day wait). The premium for this coverage is $97 per month.

Tony also has $1 million worth of life insurance and ‘any occupation’ total and permanent disability (TPD) insurance. The premium for this is $75 per month. In addition, he takes out $500,000 of stand alone trauma insurance, at a cost of $79 per month.

Including the policy fee, Tony’s total annual premium is $256 per month.

Unfortunately, a prolonged illness means that Tony cannot work for an extended period of time. To assist him in continuing to pay for ongoing expenses, Tony receives a monthly benefit of $6,250 for income protection insurance. In addition, all the premiums for his other insurances are waived, meaning Tony does not have to pay for his Life, TPD and Trauma cover during this time. (Note: Only a select few insurers offer this extended premium waiver, some insurers would require that Tony continue to pay his life TPD and trauma insurance).

Looking in detail at the waived premium, the effective cost of $256 per month is equal to $438. Then take into consideration tax at the 41.5% rate and this means the overall monthly benefit is equal to around $6,688.

If Tony was on a total disability claim for five years, select life insurance companies may waive up to $17,366, which would equate to $29,685 before tax for someone in the 41.5% tax bracket. During the five years, the policy would pay over $375,000 plus indexation.

Most importantly, Tony is able to focus on recovering from his illness without his family experiencing severe financial hardship.

If you would like to find out which insurers offers an income protection premium waiver, it might be worth comparing a variety of policy options

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References: All facts and figures in this article have been provided by AXA Insurance Australia 2010.
Source: AXA 2010

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