Choosing Your Preferred Income Protection Waiting Period
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Selecting an income protection waiting period is an important step in securing your and your family’s financial future. The length of time between being unable to work because of illness or injury and receiving your income protection benefit is an agreement you make with your insurer. Your choice can impact several aspects of your policy, including the premium you pay.
This guide explains income protection waiting periods and the options available to you.
When you are considering income protection insurance, it is essential that you have a clear understanding of the proposed waiting periods available because it will play a significant role in your claim, and if or when you may be eligible to have benefits start to accumulate.
Why are there waiting periods for income protection?
A waiting period is part of every income protection insurance policy in Australia. It refers to the length of time the sickness or accident must keep you off work before your benefit period commences, generally for:
- Accidents: the waiting period starts the day the accident occurred.
- Sicknesses: the waiting period starts on the day the illness is diagnosed by a medical practitioner.
It’s important that the date you are unable to return to work be identified as soon as possible as it is one of the fundamental details in any income protection claim. Consult your PDS regarding the insurer’s definition of when a waiting period will start.
Income protection waiting period options
The insurer will usually give you a choice of waiting period. In Australia, waiting period options typically include:
- 14 days
- 30 days
- 60 days
- 90 days
- 180 days
- 1 year
- 2 years
Before choosing a waiting period, you first need to consider:
- Your employment type; full-time, part-time, self-employed, contractor or business owner.
- Whether your employer offers any provisions in the event of disability, for example, sick leave and annual leave.
- How long your employer provides cover for.
- Whether you have an emergency fund or savings stored up and how many times your salary it is.
- Calculate the number of months you’ll be able to sustain your lifestyle and support your family when unable to work.
Frank is a self-employed plumber, and his ability to earn an income is directly linked to his ability to work. If Frank does not complete projects on a daily or weekly basis, he won't get paid. In such a no work, no pay environment, income protection 14 day waiting period would likely be a better option for Frank.
Charlene is a full-time administrative clerk and enjoys the benefits of sick leave and annual leave. If Charlene were unable to work because of an injury or illness, she will be paid during her sick leave and might even be able to use her annual leave to extend the period she needs for recovery. In Charlene's case, she'll likely only need income protection benefits to start when her employee leave is exhausted and a longer waiting period might be a better option.
Day 1 Accident Cover
This option only applies if you suffer an accident, generally defined as a bodily injury directly and solely caused by a violent external and visible means and does not cover sickness. It usually provides a portion of your benefit for all of part of your waiting period if you are totally disabled due to the accident for longer than the specified amount of days, usually 3 days.
Different insurers may have different names for this additional benefit, including Day 4 Accident, Accidental Injury Option or Accident Benefit Option.
Specified Injury benefit
This built-in or optional add-on typically provides you with an advanced lump sum payment if you suffer a specified injury, which will vary from insurer to insurer. For example, a broken hand, leg or foot. This benefit is not in addition to your monthly income protection benefit but instead pays an advance minimum depending on the severity of your injury and your insurer.
Compare waiting period for income protection policies in Australia
Above waiting periods are from the life insurance companies latest PDS’s and based on their premier income protection policies. Please note that your type of occupation and age will have an impact on the waiting periods available to you.
Compare Waiting Periods for Income Protection
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- Disability and insurance varies depending on the definition, which in turn can affect your claims payment
- Insurance for women is more tailored as income protection companies now offer specific benefits for women such as pregnancy premium waivers, part time work cover
- Income protection premiums for women are different to men based on historical, health & probablity to claim factors