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Income protection insurance can be crucial if you cannot continue working due to a disability, illness, or injury. The insurance pays a part of your lost income and helps in keeping up with bills and other finances so you can focus on your health and wellness. If a partial or total disability has significantly impacted your ability to work, then the income protection insurance will pay
- Up to 90% of pre-tax income for the first six months
- Up to 70% of pre-tax income for a decided timeframe after six months.
Income protection insurance aims to replace your lost income – calculated by your annual earnings. It begins prior to the start of your disability, illness, or injury and can continue for up to 12 months. Each income protection policy explains partial or total disability differently. Hence, applicants must meet the eligibility criteria before applying for income protection insurance.
What does Income Protection Insurance cover?
Primarily, it covers the applicant if they cannot work due to a disability, illness, or injury. However, there are certain requirements for applicants, as follows –
Age – 18-64
Working a minimum of 20 hours/week
The Income Protection Insurance covers injury or sickness after a formal medical diagnosis if the applicant is –
- Unable to work at their usual position and workplace
- Not working in any occupation, irrespective of any generation of income.
- Under the care of a medical professional and must follow a recommended treatment for their disability/illness/injury.
Age – 18-64
Working less than 20 hours/week
The Income Protection Insurance covers injury or sickness after a formal medical diagnosis if the applicant is –
- Unable to cook meals, clean their house, provide for any dependants, shop for necessities, or use any mode of transportation – without the assistance of another individual or special equipment.
- Not working in any occupation, irrespective of any generation of income.
- Under the care of a medical professional and must follow a recommended treatment for their disability/illness/injury.
Age – 65-75
The Income Protection Insurance covers injury or sickness after a formal medical diagnosis if the applicant is –
- Unable to bathe, put on or take off clothing, use a toilet, or eat the food themselves without the assistance of another individual or special equipment. Additionally, limited mobility affecting the ability to perform necessary everyday tasks is also considered.
- Not working in any occupation, irrespective of any generation of income.
- Under the care of a medical professional and must follow a recommended treatment for their disability/illness/injury.
In the case that you choose from a range of optional covers – including Involuntary Unemployment Cover – please click here for more details.
Do I need Income Protection?
Income protection insurance can be one of your necessities if you –
- Own a business and are self-employed. Hence, you aren’t necessarily eligible for sick or annual leaves
- Have dependants that you need to support through your income
- Have a mortgage or other debt that requires monthly payments despite your inability to work.
To calculate the amount of income protection you need, you must prepare a budget plan. It will consist of your monthly and unavoidable expenses and the income needed to fulfil these expenses. At a time like this, it is also crucial to check other forms of insurance that can help you manage expenses. Hence, we recommend discussing your case with a lawyer to see if you have a total or permanent disability or trauma insurance. Moreover, private health insurance can help pay for medical expenses that may arise to treat your illness, injury, or disability. While insurance can be helpful – and sometimes a necessity – you also need support from friends and family to get through this rough time.
If you are still considering whether you need income protection insurance or not, bring your case to United Legal and talk to one of our experienced lawyers today. We help you navigate the complicated process and help determine your eligibility and financial compensation.
How do I choose an income protection policy?
There are a few things that you, as an applicant, must consider when you choose an income protection policy.
Income protection policies are based on either of the two following –
- Indemnity Value policy – Your insurance amount is a percentage of your salary when you make a claim. In the case of a decrease in your salary after buying the policy, your monthly insurance payment will also decrease. In the case that your income is variable, the insurance amount will be calculated based on your average annual earnings.
- Agreed Value Policy – Your insurance amount is an agreed amount at the time of purchasing the policy. Usually, this policy can be more expensive. This policy ended in March 2020 and wasn’t offered to new customers. However, existing customers have continued to hold the policy. In the case that existing customers demand a change in policy, their only remaining option is the Indemnity Value policy. The latter is cheaper and can be more useful for individuals with a stable income.
Waiting Period
This is the time period that applicants must wait before the government issues their payments. The majority of the income protection policies offer a waiting period that can vary from 14 days to two years. However, you must still be unable to work due to your illness, injury, or disability by the end of the waiting period – to confirm eligibility for payments. Usually, the length of the waiting period can also determine the cost of the policy – the longer the waiting period, the cheaper the policy. Hence, when deciding on your waiting period, take time to reconsider your sick and annual leaves, savings, and other emergency funds you may have left.
Benefit Period
The benefit period determines the time period for your monthly payments. However, the requirement for your inability to work due to your illness/injury/disability during this time period still stands. A majority of the income protection policies offer either two or five years. In some cases, they may also base their benefit period on your age – monthly payments up to the age of 65. However, the longer the benefit period, the more expensive the policy. Simultaneously, despite the expense, it provides greater protection in the event that you are unable to work for a longer period of time.
How do I buy income protection insurance?
The first step is to check if you already have income protection insurance through super funds. A majority of super funds also offer default income protection insurance that can be more affordable than other insurer-offered policies. However, if you don’t have income protection insurance, you can buy it from an insurance broker, financial adviser, or another insurance company. Any policy that you pay for in your income protection insurance – outside of super- will be tax-deductible. Policies excluding super usually require a higher cover amount but will also provide additional features and benefits.
One of the important steps while applying for income protection insurance is to provide honest and important information. If you apply for or change your insurance, the insurer can ask you about your age, job, income (including salary, commissions, etc.), medical history, lifestyle, and high-risk hobbies. Depending on your insurer’s questions and your answers, the insurer can evaluate whether you are eligible for the insurance, calculate your premiums, and decide the terms and conditions for your policy.
However, it is crucial that you are honest when answering the insurer’s questions. Incomplete or misleading answers may lead to the cancellation of your policy or a variable cover.
Why do I need a United Legal Lawyer?
Applicants usually reach out to us at different stages of their insurance process. Some may contact us immediately after the incident; others may contact us after their insurance claim is denied. At United Legal, we accept our clients, irrespective of the stage of their journey throughout the insurance process, and continue to assist them.
Our lawyers have the experience, skills, and expertise to provide legal advice on how to mitigate your loss and complete the criteria for a successful insurance claim. We help you gather the necessary evidence and documentation while excluding irrelevant material to make your case stronger.
During the case, we require any records you may have with the insurance company, so we know what your insurer knows. It includes policy documents, other documentation, recordings, etc. Our next step is to review your claim and provide written submissions to support your claim, and ensure that the insurance company accepts your claim.
There are several reasons why the insurer may reject your claim – and we help you avoid them. As the insured, you have a legal duty to disclose any relevant information when you are applying for or renewing the insurance policy. If your answers are not comprehensive or accurate at the given time, then the insurer may deny your claim. Moreover, if the insurer suspects any fraudulent activities, then they may cite fraud as the reason for rejecting your claim. Talk to a United Legal lawyer today to discuss your case and see where you stand.
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