Income Protection Waiting Periods
A ‘waiting period‘ is part of every income protection insurance policy in Australia. It refers to the length of time the sickness or accident has to keep you off work before the ‘benefit period’ commences.
This starting date of this waiting period is very important. Generally for:
- Accidents the waiting period starts the day the accident occurred
- Sicknesses the waiting period starts on the day the sickness is diagnosed
Therefore it is important that this date is identified as soon as possible as it is one of the fundamental details in any income protection cover claim.
What are the waiting periods available?
Generally speaking the waiting periods on income protection policies range from 14, 30, 60, 90, 180, 360, up to 720 days.
When selecting a waiting period it is important to understand your financial commitments such as, home loans, debts, and availability of short term access to money you have at your disposal. Some people also have substantial sick or annual leave therefore these are also worth considering before selecting an appropriate waiting period.
Key points to know when looking at Income Protection waiting periods
You are never owed any money during the waiting period (Imagine it to be an insurance excess when thinking about how this works). Therefore only from day one of the benefit period does the insurance company start owing you 75% of your income from personal exertion.
- The shorter the waiting period the easier it is to meet the definition of a claim (As less severe accidents & sicknesses can keep you off work for shorter periods, such as 14 days, as apposed to say 90 days).
- Generally speaking the shorter your waiting period the more your premiums as there is a greater probability of you making a claim.
- All waiting periods are not the same – While they all look the same on face value the devil is in the detail, or in the product disclosure statement (PDS). Some policies require you to be totally disabled and not working in any gainful occupation for at least the first 14 or 7 consecutive days during the waiting period in order to qualify for an income benefit. Whereas stronger policies do not require you to be totally disabled for any number of days during the waiting period in order to be eligible for a partial disability benefit.
When you are considering income protection insurance it is important that you have a clear understanding of the proposed waiting period as this will play a large part in your claim, and if or when you may be eligible to have benefits start accruing to you.