How do I actually compare policies?
Follow these steps to compare income protection cover.
1. Understand your basic preferences
Does your income change or is it fixed?
How long can you go without income?
How long do you want cover for?
2. Compare the following policy benefits
We feel like it's important to consider these benefits when looking for an income protection insurance policy:
- A long enough benefit period
- A shorter waiting period
- Cover for your pre-existing medical condition
- Fully underwritten to consider your personal circumstances
- A total disablement benefit
- A specified disability benefit
- Rehabilitation expenses cover
- Day one accident cover
- Child care benefit if you have kids
- The right disability definition for your circumstance
- Agreed value cover if you want to set your benefit amount
- Guaranteed future insurability so you can increase your cover without another medical test
3. Compare price
Although we don't believe price is the most important thing to consider, once you understand what cover you need it's good to see who offers competitive premiums. Here's an idea of how much it costs to get income protection for an annual salary of $45,000.
|Policy||Monthly quote*||Weekly quote*|
|TAL Accelerated Protection||$40.54||$10.14|
|Asteron Life Complete||$45.20||$11.30|
|Zurich Wealth Protection||$48.14||$12.04|
*Prices quoted above were taken from finder's quote engine. The quote was based on a 35-year-old, non-smoking male office worker. Quotes are accurate for March 2018 and are subject to change. Any weekly premium mentioned is for reference only as most providers offer yearly, monthly and fortnightly payments.
One of the most important steps when comparing policies is to find out when you will actually be covered. Providers will class disabilities as either partial or total and permanent. The exact definition of total disablement will vary among insurance providers but most will use the following characteristics to approve a benefit payment:
- You suffer a serious accident or illness.
- You are unable to work due to suffering a serious accident or illness.
- You experience a decrease in income following a serious accident or illness.
- Total and permanent disabilities (this is where TPD insurance comes in)
- Death (this is the job of life insurance)
- Redundancy (unless policy is combined with a redundancy plan)
This is where it can get confusing. In this definition of "unable to work" or "disablement", life insurance companies use these different definitions of disability;
- You are unable to perform one or more important duties in your role at work because you have suffered an illness or injury.
- Such duties may include manual work, supervision, desk work, meeting with clients or presentations.
- You have suffered a reduction in your income of 20% or greater because of an accident or illness.
This means you are unable to perform the duties of your own occupation a certain number of hours per week (usually 10 hours) after suffering a serious accident or illness.
You will receive up to 75% of your total monthly income. Your total monthly income is based on either your income when you apply or your income when you make a claim.
A key factor that you must consider when taking out income cover is whether to take out an agreed-value or an indemnity-value income protection policy. This will help determine how much you will receive.
What do insurance companies recognise as income?
- Pre-tax remuneration paid by your employer, including salary, fees and fringe benefits of the previous financial year.
- Superannuation contributions made by your employer.
- Commissions and bonuses paid by your employer.
- Income generated due to the worker's own exertion minus expenses that have occurred during the previous financial year.
In this case your income and in turn your benefit amount, are assessed at the time you make a claim. Therefore, when you make a claim you will also need to provide financial documents, so if you income has reduced since you applied for the policy, your benefit will also be reduced, however, if your income has increased, your benefit will too. An indemnity policy can also often be around 20% cheaper in premiums than an agreed value policy, and can be ideal if you are in a steady job, where you receive regular pay raises and b