Income Protection Insurance Finder™

As you can see, there is a lot to consider when taking out income protection insurance, and following are a few simple tips to help you navigate your options:

• Ask for all the details. Don't be afraid to ask question after question of your insurer until you're sure you've got all the information. This means knowing exactly what is and isn't covered, how much your benefit amount will be, and what your premiums will be now and into the future.
• Keep up with inflation. You can look for a policy which has index linked premiums and benefits, so that you know that your benefit amount will always keep up with inflation costs.
• Look for a non-cancellable policy. A non-cancellable policy means that your insurer won't reassess your health or circumstances each time you renew your policy, so you won't be refused cover or have a premium loading added. You can also take out a policy with guaranteed future insurability so that you can increase your level of cover without your application needing to go back to the underwriter.
• The affects of other income. Be aware that offset clauses can allow your insurer to reduce your benefit payout if you are receiving income from another source, such as sick pay from an employer or Centrelink benefits.
• Know the conditions of insurance through your super. When you take out income protection insurance through your super, the policy is between the trustee of the fund and the insurer. Therefore, you need to make sure that both the trustee and the insurer know who your nominated beneficiaries are so the benefits go where they are needed.
• Make sure you're happy with the waiting period and benefit period. The waiting period is the time you have to wait before you receive your benefit payout after a successful claim. The waiting period you choose will depend on how much you have in savings, and how long you can survive financially on other benefits such as sick leave. The benefit period is the length of time you receive the benefit for, whether it is for two months, two years or until retirement.
• Own occupation or any occupation. Make sure you know whether you will be expected to return to any job you are able to perform after an illness or injury, or if you can continue to receive a benefit until you are able to return to your own occupation.
• Understand the terms and conditions. As boring and time consuming as it is to read the fine print of an insurance policy, you want to make sure you understand all of the terms, inclusions, exclusions and conditions of your policy, so that you know you have the coverage you want and need. You don't want to be paying premiums for a policy, only to find out at the time of a claim that you're not eligible for benefits.

• You are insured for the amount of income you are earning at the time of application.

• To apply you will need to provide financial documents to your insurer, but you won't need to produce this documentation again if you make a claim.
• You will know what you will be paid regardless of your income at claim time.

• Monthly benefit amount will then remain the same, regardless of fluctuations in your income over the policy period.

Who does Agreed Value suit?

This option is ideal if you are a self-employed worker or the nature of your work means that your income fluctuates frequently.

• Indemnity value will pay you for what you say you earn at the time you complete an application.
• You will need to verify your income when you claim.
• If your salary has decreased since you took out cover, your benefit will be reduced to reflect this.

Who does this Indemnity Value suit?

Indemnity value is generally a good option if you are not a self-employed worker or concerned about how your income may change in the future.

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

In the event of which you have become ill or injured and are unable to work and earn your income, you will not be able to obtain income protection insurance to cover you for the current situation. However, you can still apply for income protection insurance for future events. Since your health is taken into consideration when you apply for income protection insurance, you may find that your current illness or injury may become a pre-existing condition. This means that you may have to pay higher premiums for your coverage, although this can depend on the nature of your condition or the type and level of injury.

• All insurance approvals and premiums are assessed based on your level of risk, and the higher your risk level, the more you have to pay in premiums, and in some cases the harder it can be to secure cover. Being classified as a standard risk means you have a low risk job, lifestyle and health factors, whereas high risk cover can be more expensive for people with riskier jobs and leisure activities.

This is a condition set by each insurer, requiring that you work a certain number of hours each week to be eligible for cover.

• Unfortunately the maximum application age for most income protection policies in Australia is 64 (age next birthday). It may still be worth speaking with an insurance consultant about other insurance options that would be worth considering for your situation.

If you know what you are looking for in a policy and are keen to get cover in place straight away, you may wish to take out cover with a direct insurer. Cover can generally be put in place online or over the phone and on the same day provided you meet the providers entry requirements and no additional information is required.

The maximum length of time your policy will pay your income if you are unable to work. Typical benefit periods are two years, five years or 'to age 65', and the longer the benefit period, the higher the premium.

Each insurer will have their own specific definition, but in most cases you can be classified with a duties based disability where you are unable to perform the core tasks of your job, income based disability where your income is reduced because of you disability, or hours based disability where the hours you are able to work are reduced because of your disability.

In general, most income protection insurance providers will offer to cover your average salary of up to 75% at most. However, you may find other insurers that may offer additional cover in excess of up to 15%. It is important to note that the additional amount must be used as a superannuation contribution. This means, you will receive the 75% benefit amount and the remainder will be paid into your super fund. Therefore, it is unlikely that you will find insurers who offer to cover 100% of your income, as there should be an incentive for you to return to the workforce once you have recovered.

Policies will usually pay out up to 75% of your regular gross income.

Income protection insurance generally doesn't provide cover for redundancy. There are a number of general insurance providers that do provide cover for redundancy in Australia.

Waiting periods (The time you must be unable to work before you start receiving payout income) range from 14 days to two years, the shorter the waiting period, the higher the premium. The cause of your sickness or injury does not need to be work-related.

The maximum length of time your policy will pay your income if you are unable to work. Typical benefit periods are two years, five years or 'to age 65', and the longer the benefit period, the higher the premium.

No. Income protection will not provide any benefit payment during pregnancy. There are a number of insurers that will let you waive your premium during pregnancy.

Generally speaking, the older you are, the more likely you are to suffer illness, therefore the premium you pay will be higher. Smoking is also seen as an added level of risk and usually sees your premium rise.

A stepped premium is one which starts out as very affordable, and increases each year as you get older, while a level premium stays the same though out your policy, only increasing to keep in line with inflation.

• The monthly income that you can insure under income protection insurance will consist of a number of different components and often these will vary between insurance providers. Your insurable monthly income is the earnings that you get every month from your primary occupation and by your own personal efforts. It is important to read through the PDS or check with your insurance provider if you have any doubts on which parts of your earnings are considered to be insurable. Your total remuneration package often include:

Insurable monthly income does not include:

• All types of income that you will continue to earn even if you are unable to work
• Other unearned income, such as dividends, interest, rental income, or proceeds from sale of assets
• Income from your other occupations, other than your main occupation
• Ongoing trailing commission or royalties

Premiums can be based on the type of occupation the person has and the perceived level of risk. A manual or blue-collar worker such as a miner might be required to pay a higher premium compared to an office worker, who is considered less risky.