Life Insurance Blog

Income Protection Tips and Tricks

April 7th, 2014 | Posted by Editor in Articles

Did you know that over 60% of Australians will be disabled for more than one month during their working life? Do you think you could continue with the lifestyle you lead now if you were injured or ill and could no longer work?

Income protection will cover up to 75% or more of your salary, and cover you and your family financially if your situation changes suddenly and you can no longer work. explains some tips and tricks of income protection to help you find the right policy.

Income protection tips:
* Make sure you get enough cover by assessing your financial commitments such as mortgage payments, how much it actually costs to provide for your family, childcare payments etc.
* Work out how much annual leave, and sick days you have – this will help you decide how much cover you’ll need. If you’ve got a lot of holiday piled up you might not need to get as much cover.
* Decide how you want to pay for your income protection. Stepped premiums start cheaper but increase over time, or level premiums stay the same throughout, but work out cheaper in the long run.
* Income protection premiums are tax deductible. When you do your tax return, you can claim your income protection premiums as a work deduction.
* Get a policy that cannot be cancelled – that way your premiums will stay the same.
* Look for a policy with Guaranteed Future Insurability. This means you can increase your cover without further underwriting or evaluation. This is good if your circumstances change for example if you buy a house or your family gets bigger.
* Buy a decent policy that includes specified illnesses, elective surgery, bed confinement, home care and rehabilitation.

Income protection tricks to watch out for:
* Your cover won’t start straight away. You’ll need to choose a waiting period when you buy your cover. This is the amount of time, often 30 to 90 days, before you can make a claim.
* Watch out for the benefit period – this is how long the payments will be made for.
* Understand what’s covered and what’s not. Like any type of insurance, income protection has exclusions to pay attention to. There are certain high risk occupations that pose a risk to the insurer, and therefore you might end up paying for it. For example jobs such as underground mining, working at heights, working with toxic chemicals or working offshore will have much higher premiums, or they may not be covered at all.
* Not all medical situations are covered. Medical illness is a good example of this.
* Learn what will increase your income protection premiums. Your age, occupation, state of health, habits (e.g. smoking, drinking, high risk activities you might partake in e.g. motor racing, skydiving), even your gender could affect your premiums or your ability to get cover.
* You must be honest with your insurer when you buy. If your circumstances change at any point during your policy you must tell your insurer immediately. You could be in breach of non-disclosure if you don’t, which could result in your claim being denied.
* Beware of income protection through superannuation. Don’t assume you and your family are covered through your super. The vast majority of Australians who have income protection through their superannuation are underinsured. Also make sure that you know who you’re nominated beneficiaries are, as otherwise your income protection might not go to the person you want it to.
* Provide evidence. To have a successful claim you’ll need to provide evidence of your illness or injury, without this your claim could be denied.

Each insurance company will have slightly different features so it’s important to always review their Product Disclosure Statements to understand your cover, and to compare income protection quotes to find the right policy for you.

Make sure that you tailor the policy to suit your individual needs rather than just go with the quote you are first given.

Life is unpredictable and we can’t predict what’s around the corner, but we can do everything in our power to protect our loved ones. Follow these tips and tricks and you’ll be sure to find the right policy for you and your family.

This material is not intended to constitute personal advice, and must not be relied on as such. This information has been prepared without taking into account your objectives, financial circumstances or needs. Before making a decision based on this material, you should consider the appropriateness of this material having regard to your own objectives financial circumstances and needs. You should consider obtaining independent advice before making any decision.

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