Income protection Insurance covers you for your loss of income due to an accident and/or sickness 24/7
Why is Income Protection Insurance important?
Your whole financial structure is normally dependent on your ability to earn an income. If your income stopped consider how you would you be able to meet your financial commitments such as home repayments, rent, vehicle and other financial loan commitments, everyday living expenses etc.
Income Protection is practically the only way of replacing your income when you become sick or injured and unlike Workers Compensation it covers you 24 hours a day 7 days a week so regardless when the accident or sickness occurs your income can be protected
Are there different types of Income Protection Insurance?Yes there are. The standard Injury and Illness policies issued by the many of Australia’s leading insurers offers usually a 2 year benefit period on claims and is subject to the insurer offering renewal. If you have had a claim or s series of claims then the insurer has the option to no offer renewal. This is the most common cover taken out by tradies and is generally the most cost effective. Another type of Income Protection available is called Guarantee Renewable or Non-Cancellable Income Protection. This is the best Income Protection product available as it offers a guarantee of long term protection and providing you pay the premium you are insured up to either 60 or 65 as it cannot be cancelled by the insurer. Generally this insurance is offered by the Life Insurance companies and is normally more expensive. Tradesure offer the standard cover , however, if a client particularly requires a non-cancellable policy we have associates throughout Australia who can assist with this.
Who is eligible for Income ProtectionAnyone who earns a living through personal exertion is eligible although the vast majority of people who take out this insurance are self –employed people ( see notes further on about cover for employees). Some insurers have age acceptance limits – for instance from 18 years of age until 60 years of age depending on the occupation.
How much can I insure for?
This can also vary from insurer to insurer. Some insurers will only allow you to insurer for up to 70% of your annual gross income while others will permit up to 100%.
What if I have a pre-existing condition or conditions – will they be covered.?Normally insurers will exclude cover for pre-existing conditions. If the condition occurred say over 5 years ago and they have been no issues with the condition since, your insurer may cover you for this ,however, this is normally subject to a doctors report and acceptance by the insurer.
Is there an excess or waiting period on claims?Most insurers have a standard waiting period of 7, 14 or 28 days and the premium will reduce if the waiting period is longer. For most tradies we recommend a 14 day waiting period as this saves some premium and we have found that most tradies can survive on savings for a two week period. If a tradie has substantial savings or funds at their disposable we would also recommend that they consider a longer waiting period on claims to reduce their premium further while at the same time they would be covered for any of the longer term claims which are the claims that can impact the most.
What about ongoing business expenses?Most insurers have this additional cover available. Please note it does not cover every business expense and only those business expenses listed in the policy document which once again can vary from insurer to insurer. Please note this additional benefit is usually only payable for one year and a waiting period usually applies.
What if I am an employee – can I insurer my income?Well the answer is yes you can. A cover for this would normally exclude any Workers Compensation payments so we recommend a cover which takes this into consideration called Injury & Illness Outside Working Hours cover, What many employees fail to understand is that Workers Compensation excludes any loss of income due to sickness that is not work related so there is a real risk for employees who lose their income through sickness as generally sick pay is also limited. This cover also includes cover for loss of income due to an accident outside working hours so if you were injured playing with the kids, fell off the ladder at home or sustained an injury in some way, this policy can cover you. It is also tax deductible for employees but keep in mind the benefits are tax assessable.
Can I be covered for sports or hazardous pursuits and what other exclusions should I be aware of?
Generally these are excluded by most insurers and it is something you definitely need to advise them of if you are involved in these activities. Standard exclusions for insurers can include cover for professional sports, aviation other than in a standard passenger plane, pregnancy, self-inflicted injury, motor or motor sport racing, Motor Cycle riding, injury if under the influence of alcohol or drugs, war, invasion, and terrorism. Once again we highly recommend you are aware of the exclusions of any Income Protection policy. Some insurers will cover you for amateur sports including football subject to an additional premium.
What information do I require to make a claim?Normally insurers require a claim form from the insured person. Part of this can also include a doctor’s report or certificate to verify what has occurred and an indication of the time off work. The insurer can also request “proof of earnings” to substantiate the claim. This usually consists of a letter from your accountants , or a copy of your last tax return. This is one reason to keep you tax up to date to avoid claim complications because of insufficient or outdated records.
How often can I expect to be paid when I claim?This often depends on the severity of the claim. Say if you were off work for 4 weeks and had a 14 day excess then the insurer would normally pay you at the end of the 4 weeks. If you are off work for longer than a month, claim payments can vary from insurers to insurer – some pay every fortnight while others have a standard payment of every month usually in arrears. If you require funds urgently, particularly in the event of a claim longer than 1 month, insurers can be approached to arrange payments more regularly but remember it is at the insurers discretion. We have seen insurers make claim payments in advance where the clients circumstances are fairly desperate and once again this is a matter of negotiating this with your insurer.
Is my premium tax deductible?Income Protection premiums are tax deductible for both self-employed persons and employees. Please also keep in mind that the benefits are tax assessable.
Am I covered Outside Australia?Once again we recommend you check your Product Disclosure Statement as this can vary from insurer to insurer. Some insurers restrict the cover to Australia while others offer worldwide protection. Remember as this covers you 24/7 and includes cover for injury and sickness when you are not working as well so it is worth checking where you are insured particularly if you are traveling overseas.