Income protection insurance is a safe, reliable way to protect yourself and your family from financial hardship if you find yourself unable to work because of sickness or disability. But is it right for you and your unique circumstances? In this article, we will take a look at some of the benefits of income protection insurance in Australia and some pitfalls to look out for when choosing the right policy for you and your family.
Things to consider before you take out income protection insurance in Australia
Before you start researching the details and comparing policies, it pays to ask yourself a few questions first:
Do I actually need income protection insurance in Australia?
Once you decide to provide yourself with the safety net of income protection insurance in Australia, it is crucial to do solid research into each policy and make an informed decision.
● Some policies for income protection insurance in Australia will not allow you to claim if you stop being able to do your own job but can still perform other types of work. This is a key issue and one you must be fully aware of before taking the next step. If you were working as a carpenter in Adelaide but can now only sit at a desk, you do not want to tie yourself into having to take work at odds with your skillset just because you are physically able to do so. However, if you are prepared to consider other kinds of work than your own if you become ill, you can expect the cost of your premium to be lower, perhaps significantly so.
● Most policies will stipulate a minimum waiting period of 4 weeks from the cessation of work until payments start. This is referred to as the ‘waiting period’ and can be extended to bring down the cost of the income protection insurance premium if required. The longer the wait, the lower the premium.
● It is important to be aware of exactly how much you will receive in the case of a successful claim. The amount may be affected by other sources of income and payments from other insurance policies but will not exceed 70% of your basic salary.
● What might seem like a decent amount to live on may start to seem less so as the years pass if you are still claiming on your policy. Make sure any payments will be adjusted accordingly before you proceed.
Terms and conditions – Read the fine print of any insurance policy very carefully before you sign anywhere and don’t be afraid to ask as many questions as it takes to make you feel comfortable with your decision. You need to know exactly what you will be entitled to claim for, when you can do so, and how much you can expect to receive.
Exclusions – What, if any are in place? Are they likely to affect your own circumstances? Are there certain illnesses running in your family that will be excluded from the policy? Insurers will always look carefully at your medical history and that of your wider family. Some income protection insurance policies will raise the premium ignorer to cover existing medical conditions but others will simply exclude a pre-existing or hereditary ailment from your policy and refuse to pay out if that is the reason for your inability to work.
Cost of premium – Do you have enough money to cover the premium for income protection insurance in Australia? Depending on your exact circumstances, the costs can be prohibitively expensive and, as with any insurance premium, there are no refunds if, as is to be hoped, you never need to use it.
Always seek professional advice if in any doubt as to the full terms and conditions of any policy before you take it out.
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