If you’re unable to work due to an injury or illness, income protection insurance can cover you financially while you recover.
After all, who wants to consider the idea of dying, or being unable to work for an extended period of time, due to sickness or injury—not to mention the financial difficulty that may bring?
But it’s for that very reason that income protection insurance should be considered, especially if you have a family or loved ones that depend on you. If you find yourself injured and unable to work for a few months or more, then things could start to get very tricky, when it comes to meeting ongoing expenses such as mortgage repayments, utility bills and groceries.
As with life insurance, income protection insurance policies vary considerably. It’s important to do your homework and understand what premiums cost, for how much and how long your income protection insurance covers you for, and under what circumstances you’re entitled to lodge a claim. Before settling on a policy, be sure to undertake a thorough income protection insurance comparison process.
Compare income protection in Australia: agreed value vs indemnity value
There are two main types of income protection insurance cover – agreed value and indemnity value.
Agreed value cover is the more expensive option. This type of cover pays out an agreed benefit amount that is reflective of your income when you take out the policy, rather than when you submit a claim.
In contrast, an indemnity value policy determines your payout based upon your earnings at the time of your claim. If you happen to be earning less or are out of work at the time of your claim, the amount you receive under an indemnity value policy will reflect your changed circumstances.
Compare income protection in Australia: benefit periods
When making an income protection insurance comparison, there’s a number of factors to take into consideration that impact how much premiums cost. One of these is the benefit period, which is the maximum duration for which the policy pays out following a claim. A benefit period can last for any period between just a few months and up to five years or longer, depending on the type of policy you take out and how old you are.
Generally, the more you pay in premiums, the more comprehensive your cover is and the longer you’re covered for, and, likewise, the less expensive a policy is, the less comprehensive it’s likely to be. When you compare income protection policies, always find out how long a policy’s benefit period is, and exactly what you’re covered for, so you’re not faced with a potential sticky situation if you have to make a claim, but your payments stop before you can return to work. For example, as much as you might not want to consider it, could it be a good idea to make a disability insurance quote comparison, to make sure you’re covered for nearly every possibility?
With TAL’s Lifetime Protection Income Protection Insurance you can select a benefit period of:
- 1 year;
- 2 years; or
- 5 years.
Compare income protection in Australia: waiting period
Another factor that may affect the costs of premiums is the waiting period. This is the selected amount of time you choose to wait from when the injury or illness occurs (date of disablement) to when the benefit starts to be paid. For TAL’s Lifetime Protection Income Protection Insurance you can select a waiting period of:
- 2 weeks;
- 4 weeks;
- 13 weeks; or
- 2 years (104 weeks)
Compare income protection in Australia: your age
There is also, typically, an upper age limit on when your benefit payments stop. This varies from one provider to another, but is usually somewhere between the ages of 60 and 65.
If you are approaching 60 and currently hold an income protection insurance policy, you may wish to check what the age limit for claims is with your chosen provider, so you know you’re still able to claim, should you be required to.
Compare income protection in Australia: your profession
Typically, you won’t be covered for your entire income, with most policies covering up to 75% of your income as well as placing a monthly cap on the amount you can receive each month. With TAL’s Income Protection Insurance, this figure is $10,000 per month.
Another feature that insurers use to calculate the cost of your premiums is your occupation. For example, if you compare income protection in Australia of someone who works in mining with someone who works in an office worker, you may find that the miner pays a higher premium than the office worker because of the greater risk of injury associated with mining.
If you don’t already have income protection insurance, and you’re interested in how much a policy might cost you, head over to TAL Lifetime Protection and use the CoverBuilder tool to get an income protection insurance quote, and perhaps make an income protection insurance comparison between various levels of cover.
Then take out Income Protection Insurance online or by giving us a call, to start protecting your income, should the worst happen.