Income Protection Insurance

Feature

Description

Age restrictions

Entry ages range between 17 and 65 years depending on the insurer.

Policy expiry

An Income Protection policy will expire at the expiry age specified on the policy schedule, usually occurring when the life insured reaches age 60, 65 or 70.

Amount of cover

You can apply for a maximum monthly benefit of up to 75% of your gross monthly income for incomes equal to or less than $320,000 per annum.

For incomes greater than $320,000 per annum, a lesser percentage is applied to calculate the monthly benefit. The maximum monthly benefit you can apply for is $30,000 plus an additional $30,000 which is limited to a two year benefit period.

If an indexation benefit is applied to your policy then your insured monthly benefit may increase over $30,000 with inflation.

Benefit period

The benefit period is the number of years or the age of the life insured at which time payment of your Income Protection benefits will cease. The maximum benefit period available is to age 70.

Your benefit period may be limited due to your age or occupation and the nature of risk it involves.

Waiting period

The waiting period is the amount of time in which you must be totally or partially disabled and unable to work due to sickness or injury in order to a claim an Income Protection benefit.

Waiting periods range from 14 days to 2 years. For a given level of cover, the longer the waiting period is the lower your premium will be.

Types of contracts

Agreed value – In the event of a claim you will receive the full monthly benefit you are insured for.

Guaranteed agreed value – offers certainty that in the event of a claim you will receive the monthly benefit you are insured for, without any financials requested at the time of claim.

Indemnity – In the event of a claim, you will receive the lesser of the monthly benefit you are insured for or 75% of your average monthly earnings for any consecutive 12 month period in the 12 to 36 months prior to making the claim.

Calculation of benefit

In the event of your total disability, you will receive the monthly benefit in accordance with your policy schedule.

In the event of your partial disability, where you are still able to work but in a reduced capacity, you may be eligible to receive a monthly benefit which compensates for the portion of income lost due to sickness or injury.

The formula used by insurers to calculate a partial disability benefit is:

Ownership structures

Self owned

Superannuation fund owned

Common built in benefits

Death benefit – If the life insured dies and no TPD benefit has ever been paid under this policy, a lump sum payment of a specified amount (varies between insurers) will be paid accordingly.

Future increase benefit – Allows you to increase the insured monthly benefit by usually up to 15% without providing further medical evidence.

Indexation benefit – Your sum insured will increase each year at the rate of CPI.

Common additional benefits available at an extra cost

Accident option – If you have an accident during the waiting period which results in your total disability, you will be paid 1/30 of the insured monthly benefit for each day you are totally disabled.  Only available for waiting periods of 30 days or less.

Increasing claim option – If a total or partial disability benefits has been paid for 12 months or more, the monthly benefit will increase annually at the rate of inflation or a minimum rate specified by the insurer.

Rehabilitation benefit – Reimburses payments for rehabilitation programs, equipment and expenses up to a specified maximum benefit. The specified benefit varies between insurers and is usually in the form of a lump sum payment.

Relapse benefit – If you return to work full time after receiving an Income Protection benefit but within 12 months then suffer a relapse of the same or related sickness or injury, the waiting period to receive your benefits will be waived.

Specific injury benefit – If you suffer a specific injury as stipulated by the insurer, you will receive a payment equal to the monthly benefit amount for a specified period depending on the injury you suffer. Injuries include the loss of limbs, loss of sight, fracture of major bones (spine, pelvis, jaw, shoulder, collarbone, ankle, etc.).

Superannuation continuance –Allows you to insure up to 100% of your monthly superannuation contributions as a monthly benefit paid into your nominated superannuation account.

Trauma benefit – entitles the life insured to receive a specified lump sum benefit either in addition to or instead of their insured monthly benefit, should they suffer a listed trauma event or critical illness. The exact terms of this benefit vary between insurers.

Making a claim

In the event that you wish to make a claim on your Income Protection policy, we will handle the entire process and assist in making this simple and efficient for you.