Australian income protection policies are like jelly beans. They may look the same size and shape but come in many colors! Understanding these colours will allow you to get affordable income protection that doesn’t compromise on quality.
Knowledge is power. It will help you to get the income protection insurance you need without having to pay for unnecessary things.
What’s Income Protection?
Income protection insurance can be described as a monthly income supplement that provides financial support for those who are disabled or injured.
It can provide up to 75% of your income prior to disability during prolonged sickness or injuries.
Types Of Income Protection
Income protection insurance is more than just income replacement. Insurers have made many improvements to the coverage over the past decade, including transport benefits and accommodation benefits. You may be interested in some of these extra benefits, but not others. As a result, it is common for insurers to offer income protection that ranges from standard coverage to premium.
In In addition to the ‘extra’ benefits, there are two additional options that you should consider. These are listed below.
Benefit Period
You will want to choose the length of your income protection coverage. Two options are now available from most insurance companies:
* 2 years
* For those over 65
The first policy covers you for up to two years of disability. The policy will pay you up to 24 monthly payments. You will lose your coverage if you become disabled, turn 65, or die within 2 years.
This insurance coverage can be considerably cheaper than the alternative “To Age 65” option, as the benefit is only for two years.
While 2 years may seem like a very short period, the To Age 65 benefit periods will provide a benefit until the person becomes 65, is no longer disabled or dies. If you’re 25 years old, the insurer might have to pay you a benefit for 40 if your condition continues. Insurance premiums are therefore more expensive.
The right option for you depends on your financial situation, as well as any other insurance policies you have.
Selecting a Waiting Time
Another important option that you need to consider when purchasing income protection insurance is the length of the waiting period. This is the time you will have to wait before payment begins after you become disabled.
There are generally several options available, including 30, 60 and 90 days. However, it is possible to find waiting times of up to 360 days. Although you should contact your insurer immediately, it may take up to 90 days for you to start receiving income. It is important to remember that you will not receive any benefit during the waiting period. Instead, your benefit period will begin on the day after the waiting period ends.
You must be financially stable during this waiting period. Before deciding which option to choose, it is important to consider how much sick leave you have and what savings you have.
Your waiting period generally begins on the day that your injury occurs, or the date your illness is diagnosed. This is crucial because your waiting period does not start if you have been off work while you wait for medical attention. Many policies also require that the waiting period must be served consecutively. This means that if your ‘try’ is to return to work, the waiting period may need to be re-started.
