Income protection insurance is a way of ensuring that in the event that you are unable to work due to an illness or injury, you will have access to an income and thus be able to take care of your financial obligations. Most policies for income protection insurance in Australia will provide you with up to 75 per cent of your income on a monthly basis. This percentage will include any fringe benefits, commissions or bonuses you are entitled to.
When you receive an income protection benefit payout, it is to help you cope with the daily living expenses while servicing any loans that may be outstanding. You will therefore be able to pay for everyday expenses, education fees, mortgage repayments and any credit card debts you may have. Your standard of living will therefore be maintained through the income protection insurance. Australia insurance companies offer various income protection policies and it is therefore important to understand what benefits you stand to gain from taking out such a policy.
Types Of Income Protection Insurance
There are different types of income protection insurance. Australian insurance companies may offer you the normal income protection policy, which gives you a cover of 75 per cent to 80 per cent of your income. The insurance company cannot cancel your policy as long as you continue to honor your premium payments. The terms of the policy cannot be adjusted by the insurance provider once you have taken out the policy. This is the most comprehensive cover for income protection that is available in the insurance market.
The other type of income protection insurance available is the group salary continuance insurance. In this case, an employer decides to take out an insurance policy on behalf of the employees. You will be covered to a maximum of 75 per cent of your monthly income. However, this policy does not take into consideration the specific aspects of the individuals and may therefore not help in specific situations.
There is also an income protection policy known as the sickness and accident insurance that is offered by general insurance companies. Under this policy, you will be covered for a variety of accidents and sicknesses, and the cover is normally done at a fixed rate. The biggest problem with this cover is that once you make a successful claim and get a payout, the insurance provider has the right to deny you a renewal of the policy, or they can simply cancel the policy.
This will leave you devoid of income protection, thus making you vulnerable in the event that you will need another payout in the future. Renewal of this policy is done annually, which gives the insurance provider a chance to re-assess your policy and adjust it depending on how your conditions are changing and your age. More often than not, when the policy is renewed, the premiums are adjusted upwards.
Getting Higher Benefits
It is possible to be covered for more than 75 per cent of your income. An additional 15 per cent of your income can be covered, but the additional 15 per cent will be paid to your super fund as a contribution and not directly to you in case of a payout.
Kerrie peacock is devoted to insurance research in order to help end consumers make informed decisions. For more information on income protection and other related policies visit www.mecovered.com.au/income-protection-insurance-australia.