Can I get income protection if I work as a manual worker in a high risk setting?
Yes you can. Although heavy duty physical job carry a greater risk of injury, you can still get income protection. However, keep the following in mind:
- You may need to pay more for cover
- You may have certain exclusions on your policy
- You may need to combined other forms of insurance for a comprehensive cover e.g. health and work cover
What can life insurance and income protection do if I'm a high risk manual worker
Life insurance, at its core, will pay out a lump sum to your family, partner or other chosen beneficiaries if you die. It usually comes with automatically included extras, or optional additions, the two most common of which are:
- Income protection. This pays out a portion of your usual wage, such as 75%, if an injury or illness leaves you unable to work.
- Trauma insurance. This policy will pay out a lump sum if you suffer from a specific injury such as the loss of a limb, illness like cancer or heart disease, or type of disability like blindness, that is specifically mentioned in the policy.
Unlike workers’ compensation, these insurance policies will pay out whether you were injured on the job or in your own time, and you can spend the benefit payments however you like.
If workers compensation covers me on the job, why should I bother with income protection?
One of the key reasons is delayed reaction.
- Delayed reaction. A lot of the injuries associated with manual labour take a long time to appear and might only show up months or years later. This is a problem because workers’ compensation requires proof that you were injured on the job. If the injuries only emerge after you’ve finished or left the job, this can be difficult to prove.
With direct life insurance and income protection insurance policies, purchased directly from insurance brands, you will still get paid even if you cannot prove that the injury happened at work.
How do insurers determine your premium if you work in a high risk manual job
Before selling an insurance policy, insurers work out how risky it is for them. With life insurance and its bundled extras like trauma insurance and income protection, this means calculating the odds of you dying, becoming disabled or suffering a serious injury or illness. Naturally your job plays a big part in these calculations. Some key considerations to think about:
- If you work more than one job. the most dangerous is used to calculate premiums.
- Your job is defined by what you actually do each day, not simply what industry you’re in or what your job title is. An administrator who works onsite at a mine, for example, is an administrator and not a miner.
- Each insurer has a different way of categorising occupation risk. To run the odds, insurers divide all jobs into different categories based on occupational risk. Each insurance brand does their own analysis and has different categories. The category your job falls into determines how much the insurer will raise your premiums to compensate for the risk.
How do insurers categorise risk?
- The safest category is usually called something like “professional” or “white collar”. This is defined by jobs that involve little or no physical labour and have a very low rate of workplace injuries.
- The riskiest jobs of all are usually just known as “uninsurable”, meaning the jobs are so dangerous that the insurance companies simply won’t sell these people a standard policy. This category is usually reserved for jobs like stuntman, pyrotechnics engineer, professional diver and other extreme occupations.
- Manual labour jobs usually fall into the middle categories which are often called something like “blue collar”, “skilled manual labour” or “unskilled manual labour”. This means you can expect to pay more for an insurance policy, but it is still relatively easy to find a variety of options.
In addition to checking on your occupation, insurers will also look at what you do outside of work to find additional risk factors. Insurers generally address these by either raising your premiums with loadings or marking the risk factor as an exclusion. For example, they might charge a loading of $5 extra a month for every $1,000 sum insured if you’re a smoker, or if you have pre-existing heart disease they might exclude and not pay benefits for related conditions like heart attacks or heart surgery.
- Your lifestyle: This includes whether you are a smoker,whether you live an active lifestyle outside of work and how well you take care of yourself. Insurers may ask questions about this in the application form, and unhealthy lifestyle factors might bump your premiums up.
- Health factors: If you have pre-existing conditions like a former bout of cancer, or a family history of certain illnesses like dementia, then you are at higher risk of suffering from these conditions yourself. Insurers can impose loadings in the form of raised premiums to compensate for this. There will be questions about these types of health factors in the application, which insurers will verify by checking your medical history.
- Your pastimes: If you enjoy risky pastimes like extreme sports or car racing then you are at higher risk of death, disability and injury from these. Particularly dangerous sports like cave diving are usually excluded outright, while less dangerous and more popular ones like rugby are usually covered with ease, and at little or no extra cost.
How do income protection policies for high-risk jobs work?
Income protection for high-risk manual workers will pay up to 75% of your pre-tax earnings
You generally cannot get a policy that pays more than 75% of your usual income for the last 12 months
Insurers prefer to leave an incentive to get back to work sooner, but 75% of your usual earnings is still enough to pay the bills, pay your mortgage, and keep your kids in school, food on the table and a roof over your head.
This waiting period is how long you have to be unable to work before you can start claiming benefits. You generally can’t choose anything less than two weeks, but can pick waiting periods of up to several months. Choosing a shorter waiting period means you’ll get much higher premiums, but selecting a longer waiting period means you’ll get lower premiums.
Choose a waiting period based on your own financial circumstances. If you are entitled to a period of sick pay, have a second income from your partner or have a lot of savings then you probably have more freedom to select a longer waiting period, because you can live off savings for longer while being unable to work.
The benefit period is the maximum amount of time that a policy will pay benefits for. Usually you can choose a benefit period of between two and five years. If you selected three years, for example, then you could be out of work and claiming insurance benefits for up to three years before the payments stop. Longer benefit periods mean higher premiums but also more security. Some policies might also give the option of “unlimited” benefit periods up to a certain age, typically 65 to 70. Again, this will raise your premiums but means you can be unable to work and claiming income protection payments until the age of 65 or 70.
Example: See how a bricklayer gets life insurance
Bill, Ted and Roger were all working manual labour jobs. Bill was a bricklayer, Ted was a tiler and Roger was a rigger. One day they were discussing life insurance and realised that they all had quite different premiums and policies. To get to the bottom of this they decided to become insurance buddies and go comparing policies together. Here’s what they discovered:
- Bill the bricklayer was classified as “special risk”, meaning he could still get life and income protection insurance, but it needed special consideration with the insurance company. They asked him for more details about what exactly his job involved, whether he worked on or near roads, at heights, around dangerous materials, what kind of safety equipment he used and more. Because the job was almost entirely heavy lifting, Bill had a high premium. The insurer said that when Bill moved to a less physical and more supervisory role later on he should get in touch to renegotiate his insurance policy, which he did.
- Ted the tiler got two completely different quotes from two different insurers. Looking more closely, he realised that this was because one thought he was a roof tiler while the other thought he was a wall and floor tiler, thanks to a mistake he made on the paperwork. The insurer that thought he was a roof tiler had much higher costs than the latter. Ted corrected this information and was able to compare two policies to find the better option.
- Roger the rigger was turned down by a couple of insurers before finding one that would offer him a policy. The one that did agree to cover him only did so after confirming that he was trained and fully certified to work at heights and had his rigging licence. Even then, he still had higher premiums than both Bill and Ted and still found some insurers who would not offer him insurance for injuries on the job. Because he had good workplace insurance through an industry association, Roger decided to save money and go with a policy that did not cover workplace accidents. With this as an exclusion, Roger had many more options available.
Steps to getting cover for a high risk manual labour job
Comparing life and income protection insurance policies for manual labour jobs can be time consuming. This is because different insurers all have different ways of assessing risk and you'll likely receive a variety of quotes.
- Compare online. The first way of finding the ideal option for your situation is by directly comparing as many policies as you can according to both their benefits and their costs. Rule out the unsuitable policies and put potential options in a maybe pile. Then you need to get in touch with each of those potential insurers for a personalised quote. If you want to modify a policy, feel free to ask the insurer if that’s an option. Many will let you customise a policy to better suit your needs, while others won’t.
- Use an adviser. The second way is by using an insurance adviser. These agents do the legwork for you and can even access policies that aren’t on the public market or haggle with insurers for a different deal. You can employ them for free by finding an agent who gets paid commissions by insurance companies, or can retain one for a fee if you want an insurance expert to help you out more generally.