Written by Taking out income protection insurance can be a great way to get back on your feet financially after an injury or illness keeps you off of work for a while. However, finding a policy that's just right for you can take time and effort when there’s a wide range of options available. That's where Savvy can help. Start the comparison process with us today by taking out a free, no-obligation quote!
Why compare life insurance through Savvy?
You can compare life insurance policies through us for free, allowing you to come back and continue comparing at any time.
By considering life insurance policies from insurers you can trust, you can be confident in the quality of the comparison process.
By filling out a simple online quote form, you can compare offers based on their coverage, cost and more before you buy.
We’ve partnered with Compare Club to bring you a range of life insurance policies to help you compare them side by side.
What does income protection insurance cover?
In terms of the events which may lead to an insurance claim, income protection insurance typically includes cover for:
- Injury: if you break your leg or take a stumble and you're out of action for a while, your income protection insurance can cover the cost of taking time off work for an extended period, provided your circumstances qualify for coverage.
- Illness: if you need to take extended time off work as you recover from an illness for treatment this coverage may allow you to continue to receive part of your income so you can focus on your recovery. This could be anything from mental health to recovering from a heart attack.
As mentioned, income protection insurance can offer cover in the form of an ongoing benefit worth up to 70% of your income. However, insurers will have terms and qualification points you’ll be required to meet, such as the consistency of your income and whether it falls within their set maximum. As such, it’s crucial to compare policies and read product disclosure statements (PDS) to determine what can and can’t be covered.
However, there are some illnesses, injuries and other situations which income protection won’t cover. These vary from insurer to insurer, so it’s best to read the policy document carefully before you sign up, but can commonly include:
- Self-inflicted injuries
- Normal pregnancy and maternity leave (however, if you suffer from long-term complications relating to your pregnancy, you may qualify for coverage)
- Some elective surgeries
- Redundancy or loss of work
- Injuries or illnesses as a result of the misuse of alcohol or drugs
- Injuries or illnesses as a result of illegal activity
- Injuries or illnesses as a result of war or civil unrest
How do I compare income protection insurance policies?
There are many factors to consider when taking out an income protection insurance policy, which is why it’s important to compare your options carefully through Savvy. Some of the key areas to consider include:
Inclusions and exclusions
Of course, it’s crucial to consider what is and isn’t covered by your income protection insurance policy. This will help you gain a greater understanding of which events you can be covered for and, crucially, which may not be included in your policy. Comparing PDS documents with different insurers will help you determine which policies offer coverage most pertinent to your needs.
Benefit periods
It’s also essential to make sure your preferred benefit period is supported by your insurer. Whether you decide to cover yourself for one, two or five years after your claim (or up to the age of 65), consider different offers to determine which ones can offer the protection you’re looking for in the event of a claimable incident.
Benefit limits
Additionally, it’s worth looking at how much you may be able to receive as a benefit should you be required to make a claim. While you can generally be paid up to 70% of your income over your benefit period, this won’t necessarily be the case for everyone, so it’s worth comparing on this basis also.
Waiting periods
A waiting period in income protection insurance is the amount of time you’re out of work before you can start receiving your insurance benefits. Depending on your insurer, you may be able to choose anywhere between 30 days and two years, though this will also depend on you meeting their specific qualification criteria.
Policy cost
Finally, while coverage is perhaps the most important area to get right, it’s still valuable to compare policies based on price to help ensure you aren’t overpaying for your insurance. The cheapest quote may not always be the best if it doesn’t afford you the cover you’re looking for.
What factors can influence the cost of my income protection insurance?
Plenty of variables play a role in shaping the cost of your policy, including the following:
- Age: older individuals tend to pay more for coverage than younger people
- Employment: those deemed to be working in a high-risk occupation are likely to pay more than others in lower-risk jobs
- Medical history: pre-existing conditions may inflate your premium
- Lifestyle: smoking can significantly increase the cost of your insurance
- Income: the more you earn, the more you’re likely to pay
- Benefit period: longer benefit periods will likely result in costlier premiums
- Waiting period: the longer your waiting period, the less you’re likely to pay for your insurance
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Frequently asked questions about income protection insurance
You don’t always have to, but it can be in your best interest to do so. For example, if you reduce your working hours for personal reasons, you may be over-insured and paying more premiums than you have to. On the other hand, if your income goes up, your cover may not be enough. Additionally, if you come down with a condition which ultimately leads to a claim, you may not be covered if your undisclosed pre-existing medical issue results in you being forced to stop work.
You will need to keep paying your insurance premiums during the waiting period, or your insurance can lapse. Once you start receiving a benefit, however, you don’t have to pay premiums until the benefit payments stop.
You can still be covered if you sustain an injury or become sick overseas and are unable to return to work once you’re back in the country. If you’re unsure about what can be covered, it’s important to check with your insurer before you buy.
If you’ve been looking for income protection insurance online, you may have come across the terms ‘agreed’ and ‘indemnity.’ Agreed-value policies pay out an amount that is specified in the contract. Indemnity policies, on the other hand, pay a benefit which is based on how much you’re earning in the 12 months prior to making the claim.
Crucially, insurers are no longer allowed to issue agreed-value income protection policies in Australia, so all available income protection policies are indemnity insurance.
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Disclaimer:
Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.
Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.
For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.
