What to Know About Income Protection Insurance

Income protection insurance can be a lifesaver in case you're unable to work due to illness or injury. This type of insurance provides a regular income to help you cover your living expenses.

It's essential to understand that income protection insurance is not the same as life insurance, although it often comes with a life insurance component. The purpose of income protection is to replace a portion of your income if you're unable to work.

Typically, income protection insurance policies pay out between 50% to 80% of your pre-tax income, depending on the policy and provider. This amount is usually tax-free.

If you're considering income protection insurance, it's crucial to carefully review the policy terms and conditions to understand what's covered and what's not.

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Income protection insurance can provide financial support during difficult times. It's designed to replace your income if you're unable to work due to partial or total disability.

You can expect to receive up to 90% of your pre-tax income in the first six months, and up to 70% for a specified time after six months. This means that if you're used to earning a certain amount, you'll still get most of that amount even if you can't work.

Income protection insurance covers a wide range of illnesses or injuries that could keep you from working, including anxiety and depression, broken bones or spinal cord injuries, muscle spasms, chronic fatigue, cancer, and complications from pregnancy or childbirth.

Some examples of covered conditions include:

Keep in mind that there are exclusions, such as self-inflicted injuries or intentional harm, and pre-existing conditions that aren't covered.

Choosing a policy for your income protection insurance can be a bit overwhelming, but don't worry, I've got you covered.

There are two main types of income protection policies: indemnity value and agreed value.

Indemnity value policies are generally cheaper and can be useful for people with a stable income. They pay out a percentage of your salary when you make a claim, but if your salary has decreased since you bought the policy, you'll get a smaller monthly insurance payment.

Agreed value policies, on the other hand, pay out a fixed amount based on an agreed percentage of your income when you sign up for the policy. These policies are generally more expensive, but can be useful if you have income that changes from year-to-year.

However, it's worth noting that from 31 March 2020, insurers can no longer offer agreed value policies to new customers.

Here are the key differences between indemnity value and agreed value policies:

Income protection policies come in two main types: indemnity value policies and agreed value policies.

Indemnity value policies are generally cheaper and can be useful for people with a stable income.

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Agreed value policies, on the other hand, are more expensive but can be useful if you have income that changes from year-to-year.

You can choose to pay for income protection insurance with either a fixed premium or a flexible payment plan.

Here are the two main types of income protection policies:

Certain illnesses are not covered by illness insurance policies.

A note on exclusions and benefits in your policy will highlight these.

Pre-existing medical conditions, including those in your family medical history, may not be covered.

Your insurer should explain any conditions attached to taking out the policy before you sign up.

Some policies won't cover you if you can do other types of work than your own job.

You should check your insurance policy to see if it says this.

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Income protection policies come in two main types: indemnity value policies and agreed value policies. Indemnity value policies are generally cheaper and can be useful for people with a stable income.

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You can choose to pay for income protection insurance with either a lump sum or regular premiums.

Indemnity value policies pay out a percentage of your salary when you make a claim, based on your average annual earnings over a period of time appropriate for your occupation. If your salary has decreased since you bought the policy, you'll get a smaller monthly insurance payment.

If you're unable to work due to partial or total disability, income protection insurance pays up to 90% of your pre-tax income in the first six months, and up to 70% for a specified time after six months.

Here are the key differences between variable age-stepped premiums and variable premiums:

The costs of taking out income protection insurance are affected by factors such as your age, health, job, hobbies and lifestyle, the waiting period, and whether you might be prepared to do other kinds of work than your own if you get ill.

When choosing an income protection policy, the waiting period is a crucial factor to consider. Most policies require you to wait a minimum of four weeks after you stop work for payments to start.

The waiting period can vary, but some policies last up to two years. The longer you're willing to wait, the cheaper the premiums may be.

The benefit period is how long you'll receive payments if you're unable to work due to illness or injury. Most policies offer two or five years, or up to a specific age, such as 65.

The longer the benefit period, the more expensive the policy, but it also means greater protection if you're unable to work for a longer time.

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Income protection insurance premiums can be a significant expense, but understanding how they work can help you make informed decisions.

Your premiums will be based on your age and salary, with costs ranging from 1% to 3% of your annual salary. The higher your salary, the higher your premiums will be.

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A factor that can increase your premiums is your age, as you're more likely to make a claim as you get older. This is especially true with variable age-stepped premiums, which recalculate your premium at each policy renewal.

Variable age-stepped premiums and variable premiums are two types of premium structures you can choose from. Variable age-stepped premiums charge more as you get older, while variable premiums charge a higher premium at the start but increase more slowly over time.

The cost of your policy will also depend on your health, job, hobbies, and the policy's elimination period and benefits period. The elimination period is the time after an accident or illness that you have to wait before receiving benefits, while the benefits period is the maximum length of time you can receive benefits.

Here's a breakdown of the premium structures:

Buying income protection insurance can be a bit confusing, but it's worth taking the time to understand your options. You can buy income protection insurance from an insurance broker, a financial adviser, or an insurance company.

If you're looking for the best deal, shop around and use a comparison website to see who will give you the most competitive quote. You can also increase your level of cover through your super fund if you already have income protection insurance through super.

Policies outside of super usually allow a higher amount of cover and have more features and benefits available, and the premiums you pay are generally tax deductible. If you decide to cancel your policy, you usually have 30 days to do so and get a full refund, but be aware that the refund amount may be less than what you've paid in after that time.

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You can suspend your Income Protection Plan for up to 12 months if you become unemployed or are on long term leave. This is known as the Premium Pause Benefit.

If you're out of work or on leave, you can put your plan on hold, giving you a temporary break from premium payments.

Suspend your plan for up to a year, providing a much-needed financial reprieve during a challenging time.

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So, you're looking to buy income protection insurance. First, check if you already have it through your super fund, as it's often cheaper and can be increased if needed.

You can also buy income protection insurance from an insurance broker, a financial adviser, or an insurance company. Premiums paid outside of super are generally tax deductible.

If you want to buy directly from an insurance company, shop around to compare prices. You can use a comparison website to make this process easier. However, you'll likely need to be assessed by the company for your suitability.

To choose the right policy, consider factors such as your financial situation, health, and occupation. Some policies may have more features and benefits available than others.

Here are some options for buying income protection insurance:

Keep in mind that policies outside of super usually allow a higher amount of cover and have more features available.

Cancelling Your Policy is an option to consider, but it's essential to know the terms. If you take out income protection insurance, you usually have 30 days to cancel the policy and get a full refund.

You can cancel your policy at any time after 30 days, but be aware that the refund amount may be less than what you've put in. Check your policy's terms and conditions to understand the refund process.

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To be eligible for income protection insurance, you must be between 18-59 years old, although people in certain occupations may be age limited to 54 years old.

You'll also need to be a citizen or permanent resident of Australia or a New Zealand citizen residing permanently in Australia.

To apply for income protection insurance, you can use TAL's Cover Builder to get a quote and speak to one of their friendly advisers.

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To determine your eligibility for Income Protection Insurance, let's start with your age. You must be between 18-59 years old, although people in certain occupations may be age limited to 54 years old.

Being a citizen or permanent resident of Australia or a New Zealand citizen residing permanently in Australia is also a requirement.

Your occupation can affect your eligibility, but you can be either employed or self-employed. However, your work must be for more than 20 to 30 hours per week, depending on your occupation.

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To apply for income protection insurance with TAL, you can use their Cover Builder to get a quote and speak to one of their friendly advisers. They'll be happy to answer any questions you might have.

You'll need to review your quote and the Product Disclosure Statement carefully to make sure it suits your needs. This is an important step to ensure you understand what you're getting into.

You can pay for your cover online, and it's a good idea to keep all your documents in a safe place in case you ever need to make a claim.

If you're not sure where to start, you can always reach out to TAL's customer support team for guidance. They'll be able to walk you through the process and answer any questions you might have.

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Before you buy insurance, it's essential to tell your insurer the truth about your health and lifestyle. This includes your age, job, income, medical history, and any high-risk sports or hobbies.

You must give your insurer full details of your and your family's medical history, as leaving anything out could lead to your insurer refusing to pay out on a claim.

If you have a pre-existing medical condition, look for an insurer that will cover it, although you may have to pay more. This is because an insurer may refuse to pay out on a claim if you've had a condition before.

You should also disclose any dangerous hobbies or a lifestyle that includes smoking, heavy drinking, or drug taking. This will help ensure your insurer doesn't later refuse to pay out on a claim.

You don't have to discuss personal or sensitive information with the person who sells you the policy. You can ask to send the information directly to the insurer's medical officer.

Here are some key things to tell your insurer before you buy:

Remember, providing misleading or incomplete answers could lead an insurer to cancel or vary your cover, or decline a claim you make.

Income protection insurance covers a wide range of illnesses or injuries that could keep you from working, including anxiety and depression, broken bones or spinal cord injuries, and cancer.

You can expect to receive up to 90% of your pre-tax income in the first six months if you're unable to work due to partial or total disability. After six months, the coverage drops to up to 70% for a specified time.

Income protection insurance also covers partial disabilities, where you're able to work in a reduced capacity, but not at your usual level. This is known as Partially Unable to Work, and it means you're working in a reduced capacity, following medical advice, and not capable of working more than 80% of your usual hours.

Here are some common illnesses and injuries that income protection insurance covers:

Disability insurance covers a wide range of illnesses or injuries that could keep you from working, including anxiety and depression, broken bones or spinal cord injuries, and chronic fatigue.

Income protection or disability insurance is designed to replace your income based on your annual earnings in the 12 months prior to your illness or injury.

Disability insurance pays a portion of your pre-tax income if you're unable to work due to partial or total disability, up to 90% in the first six months and up to 70% for a specified time after six months.

The waiting period before payments start can be as short as 14 days or as long as two years, depending on the policy.

Disability benefits last longer and usually pay out more than critical illness insurance, which only covers certain illnesses like cancer, organ damage, and heart disease.

If you're unable to work due to partial disability, you may be eligible for a Partial Disability Benefit, which pays a portion of the benefit after the end of the waiting period.

Here's a comparison of disability and critical illness insurance:

Disability insurance is designed to help you continue daily life while recovering from an accident or illness, with options like the Extra Cash Benefit, which pays an additional benefit each month for the first three months after the waiting period.

If you're permanently disabled and can't work again, you may be eligible for a Total and Permanent Disablement Insurance, which gives you options to help you live a better quality of life.

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Elective surgery can be a significant life event, and it's essential to understand how it affects your benefits.

If you're undergoing elective surgery, you may be eligible for a claim if you're Totally Unable to Work. However, this benefit isn't available within six months of the Plan start date, policy reinstatement, or any increase in coverage.

You'll need to wait until the six-month period has passed to make a claim for elective surgery. This waiting period applies to the entire plan, not just the increased portion.

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