Income protection advice

Need income protection advice? Learn the benefits of getting advice from a consultant and traps to watch out for.

It’s easy to feel overwhelmed when looking for income protection. With so many insurers and policies to choose from, and so much technical jargon to wrap your head around, it’s enough to put some people off from trying to find cover in the first place.

If you’re looking for advice on finding the right income protection policy for your needs, an experienced insurance broker can help. Brokers have an in-depth understanding of what sort of cover is provided by income protection insurance and the range of policies available. They are experts at taking the time to assess and understand your specific insurance needs and then comparing the options on offer to find something suitable.

In short, using the services of an insurance broker allows you to make an informed choice when it comes to income protection cover, saving you time and money.

What are the key benefits of receiving advice from an insurance adviser?

  • Save time. Comparing income protection policies across the market and finding one that matches all your needs takes time. Enlisting an insurance broker to help you find the right policy minimises the time and stress you will have to endure when selecting a policy.
  • Save money. If you don’t understand the ins and outs of income protection insurance and how it works, you may end up paying too much for cover. Insurance brokers give you the expert advice and assistance you need to find an affordable policy that’s tailored to your situation.
  • Get more choice. If you decide to look for cover on your own, you probably won’t be able to find the time to research all the available income protection policies. Thankfully, insurance brokers have access to a wide range of insurance companies and can sift through what’s on offer to help you find something suitable.
  • Understand the jargon. The terms, conditions and other fine print included in an income protection insurance product disclosure statement can all be incredibly confusing. A good broker can help you make sense of all the technical jargon insurers use and answer any questions you may have.
  • One point of contact. Instead of dealing with multiple insurance companies as you shop around for cover, using the services of an insurance broker allows you to have just one point of contact from when you start comparing cover to the time you submit your application.
  • Ongoing help. The service a broker provides doesn’t end when you take out cover. Your insurance broker can also help you review your cover needs as your circumstances change and offer expert assistance if you never need to make an income protection claim.

Other ways a broker can help when choosing a policy

When it comes to choosing the actual policy and tailoring it to your own needs, it can be easy to get lost swimming in complex, never-ending product documents. A broker can assist here in a number of ways.

  • Avoid expensive extras you don’t need. Unless you understand all the benefits of an income protection policy, you could end up paying for benefits you are unlikely to ever use. An insurance broker can help you avoid this trap by explaining each of the policy features and identifying those relevant to your situation.
  • Choose a structure suitable to your situation. Some insurers will only pay income protection benefits if you’re unable to perform any occupation to which you are suited by education, training or experience. A broker will help you find a policy that provides benefits if you are unable to perform the duties of your normal occupation.
  • Choose the right payment structure. Most insurers will let you choose stepped premiums (which increase gradually overtime) or level premiums (which start high but remain the same over time). What’s more, you can usually decide how often you pay your premium over the course of the year. A broker can help you align these different options to your situation.
  • Choosing the wrong benefit or waiting period. If you became disabled, how long would you be able to survive without your income until benefits started being paid? How long would you want to be able to receive benefits? Your broker can help you answer these questions and tailor cover to suit your needs.
  • Find cover matching the price. While price is certainly a factor when choosing cover, the right policy for you isn’t necessarily the cheapest. A broker can help you find a policy that combines affordability with features you need.

What are the alternatives to receiving income protection advice?

The alternative to receiving income protection advice is to buy cover direct from a life insurance provider. Direct life insurance policies are designed to be easier to understand and more accessible to a wide range of people. However, it’s important to consider those benefits in relation to the disadvantages of this approach when deciding whether direct income protection insurance is right for you.

Advantages of purchasing cover direct

  • You have complete control over which cover you choose, and you can search for a policy whenever it suits you.
  • Direct income protection insurance is generally quite straightforward in design and easy to understand.
  • Applying for direct life insurance is easy, with minimal underwriting and no need to undergo a medical assessment. Underwriting is completed at the time of claim.
  • It’s quicker than purchasing cover through a broker, and you can take out cover online or over the phone.
  • There is often an increased range of benefits available to applicants, such as multi-policy discounts for taking out other types of insurance.

Drawbacks of purchasing cover direct

  • Because underwriting is completed at claim time, you can face issues if the provider finds that certain details should have been disclosed previously i.e. existing medical conditions
  • Less flexibility to tailor cover closer to your needs through additional features or alternative payment structures.
  • You need to rely on your own knowledge and understanding of the cover options to ensure that you choose the right type and level of cover.
  • Working out how much cover you actually require for your situation can be difficult. There may be an increased risk of being underinsured
  • The simpler underwriting process often results in direct cover costing more than cover purchased with advice
  • You have access to fewer cover options than if you purchase a policy through an insurance broker

More differences you should know about

Let’s compare direct versus advised income protection in more detail.

Underwriting

The reason direct products are so easy to apply for is that the underwriting is usually done at claim time rather than at the time of applying for cover. While this may seem convenient, the problem is that because few or no medical questions are asked at application, when you go to make a claim the insurer then makes a detailed examination of your medical history. If your illness or injury is found to be due to a pre-existing condition (one which you have not declared because you were not prompted to do so), your claim may be denied.

Alternatively, if you buy your income protection through an adviser, they will organise for the underwriting to be done at application rather than at claim time, so your medical history has already been thoroughly examined and it is less likely there will be any nasty surprises that might jeopardise your future claim.

Medical questions

As mentioned previously, if you buy direct you must manage your own claim, collecting any information the insurer asks for (possibly at your own expense) and liaising with various medical professionals, all at a time when you are probably in no condition to do so, due to the illness or injury you are hoping to be paid a benefit for.

On the other hand, a financial adviser would run your claim for you, taking care of the red tape and leaving you free to focus on recuperating from your injury or illness.

Pre-existing conditions

Further to the above, medical underwriting performed at the time of application would give you ample opportunity to declare any pre-existing medical conditions you may have, regardless of their lack of severity or how long ago they might have occurred.

So if any of them needed to be covered for an additional premium, declaring them upfront to your adviser and paying slightly more for cover would mean that, come claim time, they would not be excluded and your claim wouldn’t be denied.

Advice

Do you know the difference between stepped and level premiums or “any” and “own” occupation cover? A financial adviser does and they can answer all your questions regarding income protection insurance. They can also advise you on the best type of policy for your particular circumstances and often have knowledge of and access to products not available directly from insurers.

Exclusions

Every insurance policy has exclusions, or circumstances in which a benefit will not be paid. These are listed in the product disclosure statement (PDS), so if you are buying direct, you need to make yourself familiar with them before applying.

While this is possible if you are prepared to put in the time and effort when comparing various policies, part of an adviser’s job is to do this legwork for you. And the fee you pay them for doing it could be repaid with interest if they find a policy that represents excellent value for money or prevents you from choosing one that would lose you money down the track.

Dangerous occupations

One final difference between buying direct and through an adviser is how your employment is viewed by an insurer. If you work in what is regarded as a high risk occupation (ie mining), you may find your application denied when you apply direct to an insurer for cover.

In this instance, advised income protection would have been the better option because even if one insurer were to knock you back, an adviser looks at many different insurers and policies and may well be able to find you cover with one or more of them, despite your high risk occupation.

Frequently Asked Questions

Q. How are insurance brokers paid?

  • The advisers that finder.com.au works through offer a free service and do not charge any fees to clients. They are remunerated through commissions earned from the insurance companies for policies sold.

Q. Can I really trust an insurance broker?

  • It’s important to take the necessary steps to ensure the broker you use is both experienced and certified to provide you with advice. It’s worth taking the time to verify:
  • The broker's qualifications and registration with ASIC
  • Whether the broker holds an Australian Financial Services licence to conduct financial services business or be a representative of an AFSL licensee
  • How they charge for the services provided
  • Experience in provision of service you require

Q. What companies can I receive Income Protection advice on?
Finder.com.au has access to 12 life insurance companies that an adviser can provide quotes for. These include:

  • AIA
  • AMP
  • Asteron
  • BT
  • ClearView
  • CommInsure
  • Macquarie
  • Metlife
  • MLC
  • OnePath
  • TAL
  • Zurich

Q. Will an adviser help me with my application?

  • Yes, an adviser will help you collect the necessary paperwork for your policy application and ensure you submit it to your chosen company on time.

Q. What if I am not happy with the service my broker has provided?

  • In the event you are not satisfied with the service your broker has provided, you can lodge an official complaint with the insurance ombudsman. From there, your case will be assessed and, if necessary, legal proceedings will follow.

Interested in receiving advice from a consultant?

If you are interested in applying for cover with an insurance consultant, you can make a secure enquiry by filling out the form located above. An certified insurance consultant will be in touch to discuss different policy options and provide you with a free quote for cover. Once you have found a policy you are interested in applying for, your consultant can help you organise your application. This service is provided free of charge.

William Eve

Will is a personal finance writer for finder.com.au specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won't leave them underinsured.

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