Income Protection Insurance

Income protection insurance is a policy in which the insurer agrees to pay a specified amount of money if you become ill or injured and unable to work. Income protection allows you to cover your expenses and maintain your financial obligations as you concentrate on getting better.

How income protection insurance works?
Income protection insurance essentially involves the transferring of risk from you to the insurer. In the event of a serious illness or injury, the insurer would pay a proportion of your salary or wage until you have recovered sufficiently to work again, or in the case of a permanent disability, until you are 65 years old. The particular policy may also pay a lump sum upfront in addition to a replacement income.

When applying for an income protection insurance policy the insurer will complete an assessment of the information you provide and will decide whether to accept the risk and on what terms. Be sure to read the product disclosure statement very carefully and ensure that you get clarification on any areas you don't understand.

Benefits of Income Protection Insurance
This is normally based on your annual income at the time the illness or injury occurred.  Generally, income protection insurance pays up to 75% of this amount as monthly payments. This type of insurance often provides additional cover which is not met by a trauma insurance with tpd (total permanent disablement) cover. The annual premium for Income protection insurance may be tax deductible. Speak to your financial advisor about the conditions under which this may be allowed.

Establishing the Cover You Want
Once you have decided to go ahead, you need to decide how comprehensive you want the cover to be. The more comprehensive the cover the higher the premiums will be. These are some of the key decisions you will need to make:

1. Do you want to receive payment for a disability that was the result of an accident, sickness or both?

2. Do you want to receive payment for a partial or total disability?

3. Do you want to receive payment for a permanent or temporary disability?

4. You will need to understand what disabled means in your policy. Some policies will consider you disabled if you are unable to do your usual occupation or any occupation you have studied and / or trained for, or any occupation at all.

5. Will your policy cover you for pre-existing illnesses or sickness?

6. How long do you want to receive payments?

7. How long do you want the duration of the waiting period before receiving the benefit? 14 days, 1, 2, 3, 6, 12 or 24 months?

8. You will need to decide whether or not you wish to receive payments if you are already receiving disability payments from another source such as workers compensation or Centrelink. Some policies will not make payments if this occurs or they could reduce the payment by the amount you are already receiving.

9. You also need to find out if your are covered by the policy if you weren't working or you were unemployed at the time the disability occurred.

Completing the Application Form for your Income Protection Policy
Ensure you answer all the questions fully and completely as possible. Ask the insurance broker to clarify any parts of the policy you don’t understand.

There are a large number of insurance companies that offer this cover, and many different types of income protection insurance policies. Each have different levels of cover, terms and conditions. It is best to get advice from a insurance broker to make sure the policy you purchase suits your personal situation.

Disclaimer:

No investment advice provided to you.
This web site is not designed for the purpose of providing personal financial or investment advice. Information provided does not take into account your particular investment objectives, financial situation or investment needs.

You should assess whether the information on this web site is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision on the basis of the information on this web site. You can either make this assessment yourself or seek the assistance of any adviser.
xLife Pty Ltd ASIC No. 305213 is a Corporate Authorised Representative of Milennium3 Financial Services Pty Ltd.
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