What is income protection insurance
Income protection insurance is one of the most popular types of insurance available in Australia today. This is due to the fact people understand that their livelihoods are dependent on their ability to earn an income.
Should they become sick or have an accident, their financial security may become jeopardised. People are not ready to take risks anymore, so they purchase Income protection insurance policies. The Australian income protection insurance market has a huge array of products and trying to find one that fits your circumstances can be overwhelming.
Here is a list of 5 main reasons why you should compare policies when choosing to get income protection insurance. Income protection insurance comparison can not only save your money but also ensure you find a good value policy based on your requirements.
1. The waiting period:
The waiting period is the length of time you will have to be out of work before you can collect your insurance benefits. You may be able to reduce your premium by agreeing to a longer waiting period. The key factor in deciding the waiting period is the client’s capability to self-insure and manage their cash flow for an extended period of time. Some advanced income protection policies provide a number of ancillary benefits that pay during the waiting period. So, to be eligible for a claim without having to be disabled for the waiting period, you can opt for a policy with a longer waiting period in tangent with an advanced income protection policy.
2. Level of protection:
Most income protection insurance policies allow for a monthly benefit up to 75% of the income. The higher the monthly benefit you get from the insurer, the higher the premium you will have to pay. If you have short as well as long-term financial implications, then you can consider taking multiple income protection policies rather than taking one. When considering the level of protection you require, consider your fixed living expenses as well as your other sources of income, if any.
3. The benefit period:
The benefit period is the length of time that the claim will be provided by the insurer. They are expressed either as a definite period (for eg. 2 or 6 years) or until a certain age (for eg. 60 or 65). The premium is going to be higher for a longer benefit period. When determining the benefit period, you should consider how well you can manage financially if you are disabled for a long period of time. If the answer is a simple “no”, then the most appropriate solution is the long-term income protection policy. However, in such cases, the benefit period is non-negotiable.
Although it makes sense to get a good deal, the cheapest offers on the market are not always the best. They might have numerous restrictions and limitations, which means you may not get the full payout you really hoped for when you need it. Consider your current income, overtime, bonuses and so on, to ensure the insurance policy you opt for will sustain the quality of life you are leading.
5. Redundancy protection:
Some income protection cover includes redundancy protection feature, where the insured is excused from paying premiums for a set period of time if they are involuntarily unemployed. The inclusion of this feature does not mean that the insured will get any benefit payment from the insurer in the event of unemployment.
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